Ichitan Group

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Kevin Cheng
Tel: (852) 2277 6626
Email: foreignstock@phillip.com.hk
THAILAND EQUITY RESEARCH
Ichitan Group
Earnings downgrade on delayed launches of Bailey in
Thailand and greentea drink in Indonesia
THAILAND | SET | FOOD | TRADE FLASH
01 April 2015
BLOOMBERG ICHI TB l REUTERS ICHI.BK
FY14 net profit sees notable growth despite sluggish sales
An economy of scale and lower expense played an important role driving the bottom line in
2014, while economic sluggishness, which had damped consumer spending, take a bite out
of the company’s top line.
Neutral (Maintain)
Closing Price(Bt)
Target Price(Bt)
21.10
22.30 (+5.69%)
COMPANY DATA
O/S Shares (mn) :
1,300
In the same period, sales fell 4.7% to Bt6,179mn but net profit jumped as much as 22.1%
Bt1,078.80mn. Three major contributors to the notable growth were:
1. Stronger profitability: ICHI increased two production lines for greentea beverage,
adding 400mn bottles to a total of 1,000mn bottles per year. The increased production
led to an economy of scale, meaning lower production cost and stronger profit as
evidenced by wider gross margin, rising to 34.2% vs. the prior-year 31.8%.
2. Decreased marketing expense: ICHI scaled down its marketing campaigns in the midst of
weak spending but the greentea producer set a Bt121.5mn asset impairment allowance
for the right to use trademark of Bailey. As a result, selling expense decreased by only
16.9% to Bt774.20mn.
3. Lower financial cost: With the proceeds from IPO, ICHI paid down its debt and that
pushed financial cost down by 38.5%.
Market Cap. (Btmn) :
ICHI announced to pay an annual dividend of Bt1 for FY14 performance. The company
already paid a Bt0.50 dividend for the first half and it will pay the remaining Bt0.50 for the
second half performance. The stock will trade ex-dividend on 7 May and payment on 25
May.
PRICE VS SET INDEX
27,430
Market Cap. (USDmn) :
843
52-WK Hi/Lo (Bt) :
29.75/13
3M Average Daily T/O (mn) :
Par Value (Bt) :
5.71
1.00
MAJOR SHAREHOLDERS (%)
13 March 2015
1. Tan Passakornnatee
13.9
2. Eng Passakornnatee
3. Supaporn Charoensopa
9.2
6.2
PRICE PERFORMANCE (%)
ABS
REL TO SET INDEX
1MTH
3MTH
1YR
-9%
-4%
6%
5%
na
na
40
30
20
10
FY15 outlook downgraded on delayed launches of Bailey in Thailand and greentea drink in
Indonesia
We cut our FY15 net profit forecast to Bt1,174mn to reflect the delayed launches of Bailey
(from 4QFY14 to late 1QFY15) in Thailand and greentea drink (from early year to July) in
Indonesia. ICHI has lowered its sales target for Bailey to Bt600mn while the company
expects its Indonesian unit to face operating loss in the first three years of operation in light
of high operating cost. In the circumstances, greentea sales appear to be the major
contributor to the top-line growth. According to guidance, ICHI has planned to export
greentea drink to Indonesia for the first operating year and would have OEM for a certain
number later on. ICHI plans to build a manufacturing plant if Indonesian market will be able
to move the needle in sales.
Despite the downgrade, we see a moderate growth of 8.9% but the pace of increase would
be lower compared to that of a year ago. Three reasons behind the moderate growth are (1)
lower OEM ratio—OEM production would decline further to 2% of total output after it
dropped to 9% in 2014; (2) higher marketing expense—ICHI recently launched the Episode 4
of the bottle-cap contest that will award Mercedes Benz to the 50 lucky winners in order to
stimulate sales during the peak-demand in the summer season; and (3) a potential increase
in financial cost of 24.8%—ICHI tapped financial institutions for one more production line,
which is scheduled to begin production in April.
0
Mar-12
Mar-13
Mar-14
ICHI TB EQUITY
SETI (rebased)
Source: Bloomberg, PSR
KEY FINANCIALS
FYE Dec
FY13
FY14
FY15E
FY16E
6,484
6,179
7,412
8,547
Net Profit(Btmn)
884
1,079
1,174
1,424
EPS (Bt)
0.88
0.83
0.90
1.10
P/E (X)
23.9
25.4
23.4
19.3
BVPS (Bt)
1.97
4.77
4.94
5.54
P/B (X)
10.7
4.4
4.3
3.8
DPS (Bt)
0.50
1.00
0.45
0.55
Sales(Btmn)
Dividend Yield (%)
ROE (%)
Debt/Equity (X)
2.4
4.7
2.1
2.6
58.10
2.32
26.43
0.45
18.61
0.50
20.91
0.42
Source: Company, PSR Est.
**Multiples and yields are based on latest closing price
VALUATION METHOD
P/E'15(24.7X)
Vichuda Siriployprakray
‘NEUTRAL’ rating with FY15 price target of Bt22.30
With earnings downgrade and its forward P/E of 24.7x, based on the 3-year historical P/E in
the beverage producers (OISHI, TIPCO, MALEE, CBG, and SAPPE), our price target arrives at
Bt22.30. At current share price, we rate ICHI a ‘NEUTRAL’ stance.
Page | 1 | PHILLIP SECURITIES (THAILAND)
MCI (P) 019/11/2014
Ref. No.: TH2015_0104
Mar-15
Securities Investment Analyst # 55956
Tel: 66 2 635 1700 # 525
ICHITAN GROUP TRADE FLASH
Industry Group
Name
Agro & Food Industry[AGRO]
Consumer Products[CONSUMP]
Financials [FINCIAL]
Industrials [INDUS]
Property & Construction[PROPCON]
Resources [RESOURC]
Services [SERVICE]
Technology [TECH]
Sector Name
Agribusiness
Food & Beverage
Fashion
Home & Office Products
Personal Products & Pharmaceuticals
Banking
Finance & Securities
Insurance
Automotive
Industrial Materials & Machinery
Packaging
Paper & Printing Materials
Petrochemicals & Chemicals
Steel
Construction Materials
Construction Services
Property Development
Property Fund & REITs
Energy & Utilities
Mining
Commerce
Media & Publishing
Health Care Services
Tourism & Leisure
Professional Services
Transportation & Logistics
Electronic Components
Information & Communication Technology
Sector Index
AGRI
FOOD
FASHION
HOME
PERSON
BANK
FIN
INSUR
AUTO
IMM
PKG
PAPER
PETRO
STEEL
CONMAT
CONS
PROP
PF&REIT
ENERG
MINE
COMM
MEDIA
HELTH
TOURISM
PROF
TRANS
ETRON
ICT
PSR Rating System
Capital Gain
> +10%
0% to + 10%
< 0%
Recommendation
Buy
Neutral
Sell
Remarks
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a
stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative
undertones surrounding the stock, before making our final recommendation
Page | 2 | PHILLIP SECURITIES (THAILAND)
5641029Hong Kong Representatives Contact Information
Research
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Director
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louiswong@phillip.com.hk
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Transportation and Automobiles
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Director, Research Department, Shanghai
Mainland Financial
(86) 21 51699400-105
chenxingyu@phillip.com.cn
Fan Guohe
Research Analyst
TMT
(86) 21 51699400-110
fanguohe@phillip.com.cn
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Research Analyst
Mainland Property
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chengeng@phillip.com.cn
Sales
Aric Au
Manager, Corporate & Institutional Sales
(852) 22776783
corporatesales@phillip.com.hk
Matthew Wong
Manager, International Sales
(852) 22776678
foreignstock@phillip.com.hk
Yoshikazu Shikita
Manager, International Sales
(Japan Team)
(852) 22776624
yshikita@phillip.com.hk
PHILLIP RESEARCH STOCK SELECTION SYSTEMS
Total Return
>+20%
+5% to +20%
-5% to +5%
-5% to -20%
<-20%
Recommendation
Buy
Accumulate
Neutral
Reduce
Sell
Rating
1
2
3
4
5
Remarks
>20% upside from the current price
+5% to +20%upside from the current price
Trade within ± 5% from the current price
-5% to -20% downside from the current price
>20%downside from the current price
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like
(but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or
absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
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