The first-quarter net profits of listed Thai companies are projected to decline 13% year-on-year, but grow 16% quarter-on-quarter, according to analysts who warn an earnings downgrade is on the horizon given the trade war.
The banking sector reported better earnings than expected, said Bualuang Securities (BLS).
The brokerage said the industries expected to have strong year-on-year earnings growth are meat, ICT, transport and tourism.
Sectors projected to post a year-on-year profit contraction are energy, petrochemicals, construction materials, packaging and automotive.
BLS sees downside risks for earnings, with its covered stocks undergoing an average forecast cut of around 7%.
Sectors facing sharp downgrades are construction materials, real estate, electronics, energy, transport and hotels.
During the US-China trade tussle from 2018 to 2019, the earnings forecasts of companies on the Stock Exchange of Thailand (SET) were cut by as much as 27%, noted BLS.
Sectors with earnings downgrades of more than 30% compared with the SET average were tourism (-59%), electronics (-56%), petrochemicals (-54%), contractors (-54%), media (-53%), transport (-49%), real estate (-35%) and construction materials (-33%).
Sectors with smaller downgrades include ICT, hospitals, banks and retail, noted the brokerage.
In terms of investment strategy, BLS recommends investors focus on earnings plays expected to post strong first-quarter profit growth that have not faced significant earnings downgrades in the past three months. These comprise Charoen Pokphand Foods (CPF), Thaifoods Group (TFG), CP All (CPALL), Bangkok Dusit Medical Services (BDMS), Praram 9 Hospital (PR9) and Advanced Info Service (ADVANC).
Other recommendations are pre-seasonal plays or stocks likely to accelerate in the second quarter, such as Minor International (MINT), which benefits from Europe's hotel high season, and Bumrungrad Hospital (BH) as earnings momentum could pick up with the return of Middle Eastern patients post-Ramadan.
Daol Securities (Thailand) has a positive outlook on the banking sector, assigning it an overweight rating.
Bank of Ayudhya (BAY) posted a first-quarter net profit of 7.53 billion baht, up 20% year-on-year, while Kasikornbank's (KBANK) earnings edged up 1.08% to 13.8 billion baht. Krungthai Bank (KTB) recorded a net profit of 11.7 billion baht, up slightly year-on-year.
Tisco Financial Group (TISCO) reported a 3.43% year-on-year decline in net profit to 1.64 billion baht, while TMBThanachart Bank's (TTB) earnings dipped 5.17% to 4.99 billion.
Daol estimates the sector's net profit could total 55 billion baht in the first quarter, up 1% year-on-year and 8% quarter-on-quarter, largely due to lower provisions, particularly from Bangkok Bank (BBL), KTB and Siam Commercial Bank (SCB).
On the other hand, TTB raised its provisions due to high-risk lending, while Kiatnakin Phatra Bank (KKP) continues to face high provisions linked to losses from repossessed vehicles.
Lower operating expenditure also contributed to the improved profitability of the sector, noted Daol Securities.