The SET index found support at 1,350 in the first week of March and later bounced back. The 1,350 level has acted as a critical support through the entire quarter as the market struggles to sustain momentum. Among the key factors influencing the market:
Potential rate cut: The sluggish economy may prompt the Bank of Thailand's Monetary Policy Committee to consider a 25-basis-point reduction to the policy interest rate at its April 10 meeting. A reduction from the decade-high level of 2.50% would be a tonic for the economy, particularly the real estate sector and businesses burdened by high interest rates.
China stimulus: Recent meetings between senior Chinese government figures and US business leaders signalled their intent to attract foreign investment as they sought to downplay political rivalry between the two superpowers.
Earnings season: Banks will be the first to report earnings for the first quarter of 2024, likely just after Songkran. Tisco, traditionally the very first to report, is expected to post a decline in net profit of 5% year-on-year and 4% quarter-on-quarter to 1.7 billion baht, attributed to a narrower net interest margin and increased loan-loss provisions.
Geopolitical risks: Ongoing tensions pose a threat to the global economy. Escalation of the conflicts in the Middle East or Ukraine could negatively affect Thailand's export sector in the long run. Higher global oil prices are a double-edged sword as they increase business costs, while often helping the SET, where big energy firms account for significant market capitalisation.
APRIL OUTLOOK
The SET index was unable to break above the 1,395 resistance level in March, suggesting a continuation of the sideways trend. The trading range is currently established between 1,350 and 1,405. A break below 1,350 could lead to a steeper decline towards 1,330. Conversely, a break above 1,395 could open the upside towards 1,405 and then 1,420. Our stock picks for April are:
- CK (Buy, target 27 baht): The construction contractor is expected to report strong 25% growth in core profit to 1.8 billion baht in 2024. Multiple projects are gaining momentum, among them the Purple Line (southern route), the Luang Prabang hydropower project and the rail line from Den Chai in Phrae to Chiang Khong in Chiang Rai. Ridership on expressways and mass transit lines operated by subsidiary BEM is hitting record highs, and the power producer CKP is poised to benefit from the end of the El Niño weather pattern. Our target price is derived through a sum-of-the-parts (SOTP) analysis. Key catalysts include the Chatuchot-Lam Luk Ka extension of the Chalongrach expressway (20 billion baht), and potential conclusion of a 30-billion-baht double-deck highway project within the second half of 2024.
- JPARK (Buy, target 7.50 baht): The parking management services firm is projected to deliver a 28% compound annual growth rate (CAGR) from 2023-25. Core profit is expected to reach 104 million baht this year and 129 million in 2025, driven by an aggressive expansion plan. Our target price is based on a 2024 price/earnings (PE) ratio of 29 times, implying a PE-to-growth (PEG) ratio of 1 time. Key catalysts include urbanisation and rising parking demand as vehicle ownership increases.
- MTC (Buy, target 52 baht): Strong profit growth of 21% is projected for the hire-purchase lender this year, driven by a 14% increase in total loans, a slight decrease in non-performing loans to 3%, and a 20-basis-point reduction in credit costs. Its cost-to-income ratio is expected to remain stable at 47%, and the company is outperforming peers with a stable NPL trend. Our target price is based on a 2024 price-to-book value (PBV) of 3.0 times, or 2 standard deviations (SD) below the 10-year average. Key catalysts include a potential central bank policy rate cut next week.
- SAPPE (Buy, target 106 baht): Net profit is expected to soar 22% in 2024 for the beverage producer, reaching 1.31 billion baht. Total revenue is projected to grow by 24%, with overseas sales accounting for 75% of the total. Growth is being driven by increased production capacity (25% or 44,000 tonnes per year) and new product launches in the second quarter. Gross profit margin is expected to decrease slightly to 43.8% because of rising sugar prices, although SAPPE locked in sugar costs for the first half of 2024, mitigating the impact. Our target price is based on a 2024 PE of 25 times, close to 2.25 SD above the five-year average. Key strengths are the company's growing global footprint and consistent capacity expansion (25-30% annually). The valuation is attractive, at 21.5 times 2024 PE, with impressive compound annual EPS growth of 41% from 2022-24.
- SJWD (Buy, target 21 baht): A 59% surge in core profit and a 47% gain in EPS are projected for the logistics and warehouse company. Growth is driven by new product launches, cross-selling and upselling initiatives. There is a low base effect due to M&A-related expenses (145 million baht) incurred in 2023. The target price is based on a 2024 core PE of 31 times, in line with the five-year average.
- SPRC (Buy, target 10.50 baht): The petroleum refiner is poised for a rebound in 2024, with net profit expected to reach 4.9 billion baht, reversing a net loss of 1.2 billion in 2023. The turnaround is being driven by a strong market, improving gross refining margin, increased refinery throughput and inventory gains. Our target price is based on a 2024 PBV of 1.13 times, or 1.0 SD below the five-year average. The current share price also offers a compelling dividend yield of between 4.5% and 5.2% for the next two years.
- TTB (Buy, target 2.10 baht): The bank's first-quarter net profit is projected to surge 23% year-on-year and 9% quarter-on-quarter to 5.3 billion baht, driven by tax benefits and a potential decrease in loan-loss provisions (down 48% quarter-on-quarter to 4.8 billion baht). Full-year net profit is projected to reach 21 billion baht in 2024, exceeding peer growth. Continued tax benefits and a high-yield loan strategy are expected to further boost earnings in the second quarter of 2024. Our target price is based on a 2024 PBV of 0.85 times, or 0.75 SD below the 10-year average. The current share price also offers a significant dividend yield of 6-7%.
