At this time, most listed companies have begun to announce their Q2 earnings. This year, many businesses have faced significant pressure due to the COVID-19 crisis, leading to temporary shutdowns and slowdowns. Overall, profits of companies in the stock market have shrunk by 47% compared to the previous year.

Almost all listed companies have reported their Q2 earnings as of mid-last month, with total profits amounting to 116 billion baht. Although this represents a 32% increase from Q1, it still reflects a 47% decline compared to the same quarter last year. For the first half of the year, net profits totaled 206 billion baht, down 58% from the same period last year.

Industries that saw a shift from profit to loss include the air transport sector and the hotel and tourism-related services sector, all of which have been directly impacted by the COVID-19 outbreak and the suspension of international travel. Meanwhile, some sectors managed to maintain profitability.

However, profits have also contracted by more than half in sectors such as construction and real estate, hospitals, energy, petrochemicals and chemicals, commerce, and banking. There are still companies in certain sectors that managed to achieve profit growth this quarter, primarily those that benefited from or were unaffected by the pandemic, such as agriculture and food, securities, electronics components, and insurance. The telecommunications sector, however, experienced a slight decline in profits.

One sector that performed better than market expectations and is likely to continue this trend is the electronics components sector, which saw a 47% profit growth compared to last year. This growth was positively influenced by the work-from-home trend, which significantly increased the demand for components in the data center segment. Q2 is expected to be the lowest point of the year, as demand for semiconductors and automotive chips is anticipated to rise in Q3 and Q4 as the economy begins to recover. Additionally, some companies producing components related to telecommunications are benefiting from the advent of 5G technology, which necessitates consumers to upgrade their devices.

The food and agriculture sector in Q2 saw a profit growth of 105%, with the food business benefiting from rising meat prices. However, the sector that experienced the most significant positive impact and substantial profit growth this quarter is the agriculture sector related to rubber, particularly companies producing and selling rubber gloves, which are essential products currently in high demand. The company has received numerous orders from abroad, leading to a significant increase in average selling prices, while raw material costs have only slightly increased. Thus, profits have surged and are expected to continue growing into next year due to rising glove prices. The upstream and midstream rubber businesses are also showing signs of recovery due to increased demand for tires in China as it emerges from lockdown.

The securities sector also experienced a 9% growth compared to last year, driven by loan growth in line with branch expansion and cost control. In the second half of the year, growth is expected to continue due to seasonal increases in loan demand, although there may be caution regarding potential increases in reserve expenses if asset quality deteriorates after the debt relief period ends. The insurance sector also saw a profit growth of about 10%, attributed to COVID-19 insurance sales and a decrease in claims due to reduced accidents and illnesses during a time when people traveled less and wore masks.

In the telecommunications sector, Q2 was negatively impacted by a decrease in top-up revenues, stemming from free call services provided to assist the public by the National Broadcasting and Telecommunications Commission, the closure of service centers in malls, and the absence of tourists. However, cost control measures by each company resulted in net profits exceeding expectations. In the second half of the year, it is anticipated that performance will gradually recover as usage returns to normal levels, with an increasing trend in data usage and ongoing growth in broadband internet business.

Conversely, the commercial banking sector continues to struggle, with profits declining by 40% compared to the same period last year due to significant provisions for doubtful debts, which are likely to remain high in the remaining quarters of the year after the debt repayment relief period ends. Additionally, interest rate spreads are expected to decrease if there is another cut in policy rates.

The reported earnings are likely the lowest point of the year, with businesses expected to gradually recover in Q3 and Q4, depending on the type of business. For the overall year, analysts have revised their net profit forecasts for the market down to 60 baht per share for this year, before recovering to 78 baht per share in 2021. With the SET index around 1300 points, this translates to a market P/E ratio of 21.7 times this year and 16.7 times next year, which is still relatively high. Therefore, investors should proceed with caution by selecting fundamentally strong stocks with robust financials and growth prospects.

SOURCE : www.bangkokbiznews.com