Ch. Karnchang: Strong backlog and earnings momentum
- Backlog stands at THB192bn (4+ years of revenue), with further opportunities from upcoming mega projects
- 3Q25F earnings to grow y/y and q/q, driven by strong equity income, a THB232mn dividend from TTW, and gains from the LPCL divestment
- Thailand’s FY2026 budget to support infrastructure spending, benefiting contractors
- Maintain BUY with an SOP-based TP of THB19.20
On track with revenue and margin targets. CK maintains its 2025 revenue target of THB40-45bn (+7-20% y/y), broadly in line with our assumption, and has already secured 50-57% of the 2025 target in 1H25. CK expects GPM margin to be around 7%+ in 2H25F (vs. 7.8% in 1H25), supported by progress on high-margin projects such as the MRT Orange Line.
Huge backlog on hand to secure revenue for the next four years. Although CK did not secure any projects in 1H25, it has a huge backlog on hand. The company targets to participate in bidding for mega and private projects by the end of FY25, including:
- High-speed rail phase 2 (Korat–Nong Khai), worth THB235bn
- Motorway M5 (Rangsit–Bang Pa-in), worth THB25bn
- Red Line (Rangsit–Thammasat), worth THB4bn
- A double-deck expressway worth THB35bn
Thus, CK’s earnings outlook should remain resilient enough to withstand potential delays in the country’s infrastructure spending.
CK to divest 10% of its LPCL (Luang Prabang Power Company Limited) shares to TTW. To mitigate LPCL’s performance fluctuations, CK plans to divest 10% of its stake in LPCL by the end of 3Q25F, reducing its holding from 20% to 10% of registered capital. The transaction is expected to generate at least THB1bn in extra gains to be booked in P&L, including: i) a pre-tax gain from the sale of the investment, and ii) a gain from reclassifying the asset from equity income to a long-term investment through OCI. After the sale, CK will treat LPCL as a long-term investment with gains/losses recognised through OCI. Equity income losses will no longer be reflected in CK’s financial statements.
We expect 3Q25F earnings to grow y/y and q/q, driven by i) strong equity income as CKP and BEM enter their high season, especially CKP due to positive operations and higher water inflows; ii) a THB232mn dividend income from TTW; and iii) an extra gain of around THB1bn from the sale and reclassification of the LPCL investment.
Limited impact from Cambodian workers returning home. According to CK, Cambodian workers returning to their home country has had minimal impact, as direct labour consists entirely of Thai workers. For subcontracted labour, Cambodian workers account for only 10–100 workers per site, with the majority being from Laos and Myanmar.
Outlook
Thailand’s FY2026 budget approved by Senate, awaiting royal endorsement. Thailand’s fiscal year 2026 budget, totalling THB3.78tn (+0.7% y/y), has cleared all legislative hurdles after receiving Senate approval on 2 September 2025, and it now awaits royal endorsement. The budget allocates 70% to fixed expenditures, 23% to public investments, and 4% to debt service. Implementation is set to begin on 1 October 2025, ensuring continued government spending momentum despite recent political turbulence. This should provide support for public investment and benefit the contractor sector.
CK share price has historically gained after PM exits. Since 2006, there have been six instances of Thai Prime Ministers leaving office before completing their term. Historical data shows that CK’s share price often delivered strong positive returns within one to three months after such events, likely reflecting investor optimism over infrastructure spending and policy continuity. Notable exceptions occurred during the 2008 global financial crisis, when CK shares fell sharply following the collapse of the Lehman Brothers. With the FY2026 budget now approved by the Senate and set for implementation from 1 October 2025, historical precedent suggests contractor stocks such as CK could benefit in the months ahead, though political and market volatility remain key risks.
Solid earnings outlook in FY25F. We expect solid earnings of THB1.7bn in FY25F (+16% y/y), driven by i) huge backlog driving revenue growth of 11% in FY25F due to progress in the MRT Orange Line (Western), the MRT Purple Line, the Denchai-Chiang Rai double-track railway, and Luang Prabang projects; ii) a steady GPM of 7.35% in FY25F from a change in product mix towards high margin projects; and iii) increased income from associates from BEM and CKP.
Maintain BUY with a TP of THB19.20. We maintain our BUY rating on CK, supported by (i) a robust earnings growth of 16% in FY25F and 19% in FY26F, driven by its large backlog and strong equity income from BEM and CKP; (ii) a solid financial position, with THB12.9bn in cash, THB18.3bn in retained earnings, and a net D/E ratio of 1.70x as of end-2Q25; and (iii) an attractive valuation, as CK trades at a 0.9x FY25F P/BV, approximately -2.0SD below its five-year historical average.
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