4Q22: Highest net profit as expected – THE STANDARD

what happened:

On February 27, 2023, ZEN Corporation Group Public Company Limited (ZEN) reported a record net profit of 55 million baht in 4Q22, a significant increase from a net profit of 9 million baht in 4Q21 and an increase of 8%QoQ according to anticipated The YoY and QoQ earnings growth was largely driven by stronger earnings. For 2022, it reported a net profit of Bt154m, recovering from a net loss of Bt92m in 2021 and 45% above pre-COVID levels.

For the key points in the 4Q22 results as follows:

1. Restaurant business (83% of revenue): Revenue was Bt780mn, up 16%YoY and 4%QoQ, driven by SSS, which returned to normal growth of 0.4% in 4Q22 (vs. 18.5 % in 4Q21 and 75.2% in 3Q22) thanks to the high base and expansion of company-owned stores. (155 company-owned stores at the end of 2022, up 40%YoY and 6%QoQ)

2. Retail Food Business (10% of revenue): Revenue was 98 million baht, an increase of 206%YoY from the consolidation of the performance of King Marine Foods Co., Ltd (KMF), an importer of frozen products. and an increase of 2% QoQ

3. Franchise income (2% of revenue): Franchise income was Bt23mn, up 35%YoY and 21%QoQ. ZEN has new franchises. 9 branches in 4Q22

4. Gross margin was 45.3% in 4Q22, down from 47.6% in 4Q21 and 46.6% in 3Q22. Weaker than expected. which is believed to be caused by higher raw material prices

5. The SG&A expense to income ratio was 37.5% in 4Q22, an improvement from 39.3% in 3Q22, despite higher wage costs following the increase in the daily minimum wage in Thailand. Effective October 1, 2022, which indicates that ZEN is able to control costs better.

How it affects:

Today (February 28), ZEN stock price dropped 1.20%DoD to 16.50 baht, while the SET Index dropped 0.18%DoD to 1,624.36 points (as of 12:30 p.m.).

2023 earnings outlook and investment strategy:

InnovestX Research has revised up its norm profit forecast for ZEN by 6% in 2023 and 2% in 2024 after earnings recovery in 2022. This is backed by company-owned store expansion in 2022-2023 and growing food retail businesses, especially KMF, which is expanding its warehouses. (Expected to be completed in 2Q23) to accommodate increasing orders.

As for 1Q23, ZEN’s profit is expected to jump YoY from a low base and slightly increase QoQ. However, for investment strategy, Outperform rating for ZEN is maintained with a year-end 2023 target price based on DCF method that has been raised to 18.50 baht. per share after revising 2023 profit forecast

For major risk factors are: 1. Economic slowdown Which will affect consumer spending 2. Intense competition 3. Higher costs and 4. Changing consumer preferences