Thai Union Group: Recovery in sight
- 2H25 to resume topline growth y/y with high GPM and SG&A expense levels persisting
- Mid-term growth outlook to be driven by product mix and efficiency enhancement, topped up with M&A
- Potential synergy benefits in play after MC increased stake, but watch-out on US consumption momentum in 2026
- Maintain BUY with an unchanged TP of THB13.90 with decent dividend yields of 4.9%/5.3% in FY25F/FY26F
Related Stories
- Thai Union Group: Slow recovery for 4Q25F19 Jan 2026
- Thai Union Group: Limited upside03 Nov 2025
- Thai Union Group: Core 3Q25F closely at breakeven 24 Oct 2025
2Q25 results recap. Total sales declined 5.4% y/y, driven primarily by negative FX impact (-4.7%), while organic impact declined 0.7%, mainly due to weakness in the frozen segment despite resilience in other categories.
GPM reached a record high of 19.7%, reflecting strong cost controls and a favourable product mix. Excluding transformation costs, profitability improved across all segments. Nonetheless, the strong GPM was offset by a rise in expenses due to transformation costs and extensive market expenses.
Growth resumption in 2H25. Management expects Thai Union's performance in 2H25 to return to y/y topline growth after the company completes the sales rationalisation of the frozen seafood business, recovering demand across all categories and a lower FX impact.
Meanwhile, ambient sales should continue delivering good momentum after proactive marketing campaigns.
Performance should also be supported by a sustained healthy GPM, with no major move in key raw material costs expected in 2H25.
However, the company also anticipates continued pressure from the elevated SG&A expense level. With the acceleration of 2H25 performance, the company nonetheless reaffirmed its latest FY2025F target (announced after the release of 2Q25 results) as follows.
Improved visibility in the US market. The finalisation of the US reciprocal tariff at 19% has improved visibility in Thai Union’s key export market. Thailand maintains a competitive position regionally across its key business strategy, which supports Thai Union’s outlook.
Regardless, the company is closely monitoring potential demand risks in 2026, particularly due to higher product prices that may weigh on US consumer spending. Management believes the increase in costs would be borne across manufacturers, retailers, and end customers.
MC group general tender offer & potential synergies. Should the ongoing tender offer (ending by Mitsubishi Corporation (MC) be successful, MC would be entitled to nominate two non-exclusive directors to Thai Union’s board.
This strategic alignment is expected to unlock meaningful synergies, particularly across the salmon supply chain, pet food, animal feed, and ingredient businesses. While these synergies have been identified, the potential financial impact has not yet been disclosed.
TU’s management believes this general tender offer would likely be completed, and the company and TU could explore business opportunities across several markets. MU has invested in TU since 1991 and was one of TU’s Top 5 customers in 2024.
Capital allocation priorities. Thai Union remains focused on prudent capital management. While maintaining a generous dividend yield (with payout ratio c.60%), the company will prioritise debt deleverage with the company aiming to have Debt/EBITDA ratio lower than 4x (vs. 4.7x in 2Q25). Management highlights the company’s D/E ratio of 1.1x as of end-2Q25 is still in line with company’s policy.
Excluding future M&As, Thai Union’s capital expenditure will be more disciplined going forward. The company does not currently prioritise share buybacks as the company has already launched four programmes since 2020.
Mid-term growth strategy. Thai Union aims to drive dynamic and sustainable growth by reshaping its product portfolio, enhancing margins, and strengthening operational efficiency. A core focus is on accelerating the shift toward value-added products – particularly in the pet food segment as well as the ingredient and packaging products segment, which is targeted to grow from around 20% to 25% of total sales by 2030 – while reducing reliance on commodity-based frozen products.
Individually, margin enhancement will be supported by expanding premium offerings across ambient, frozen, and pet care categories. Also, to boost efficiency, the company plans to invest in automation and robotics to streamline production and reduce costs. Thai Union is also rationalising its portfolio by exiting loss-making businesses and scaling up high-performing segments to maximise utilisation and economies of scale.
M&A to be a key growth lever, with a focus on profitable, sizable, and accretive deals contributing at least USD100mn in revenue. In petcare, the company admits that it’s challenging to find suitable or comparable target to its petcare business given strong financial capability. Nevertheless, management sees that accelerating growth is needed for the company rather than sticking to the niche market. Also, on top of financial benefits, Thai Union also sees the importance of non-financial benefits such as access for new markets, new technology, customer acquisitions, etc. Nevertheless, management notes that the company is not likely to buy the big brands who are direct competitors of the company’s customers.
Our take
Message from the meeting reaffirms that the bottom has passed. We believe the company’s soft 1H25 is already priced in the share price, and momentum should return more upbeat from 3Q25, with attractive valuation and decent dividend yield. We see some uncertainties on the potential consumption slowdown in the US market in 2026 after the rise in US reciprocal tariff.
However, we believe this might be offset by lesser FX impact and lesser global macroeconomic uncertainties. Benefits from its transformation projects such as Sonar and Tailwinds should also become more materialised.
Maintain BUY with an unchanged TP of THB13.90. We maintain our earnings forecast at this juncture. We derive our current TP of THB13.90 pegged to a 13.5x FY25F P/E, equivalent to its five-year historical average. The stock is now trading at a 12.1x FY25F PE (or -0.6SD of its five-year average PE). With an upside to our TP and decent dividend yield, we maintain our BUY call on Thai Union.
FY Dec | 2Q2024 | 1Q2025 | 2Q2025 | % chg y/y | % chg q/q |
Revenue | 35,283 | 29,789 | 33,389 | (5.4) | 12.1 |
Cost of Goods Sold | (28,748) | (24,177) | (26,822) | (6.7) | 10.9 |
Gross Profit | 6,535 | 5,611 | 6,567 | 0.5 | 17.0 |
Other Oper. (Exp)/Inc | (4,582) | (4,700) | (4,639) | 1.2 | (1.3) |
Operating Profit | 1,953 | 911 | 1,927 | (1.3) | 111.6 |
Other Non Opg (Exp)/Inc | 256 | 176 | 159 | (37.9) | (9.4) |
Associates & JV Inc | 179 | 291 | 158 | (12.0) | (45.8) |
Net Interest (Exp)/Inc | (620) | (585) | (586) | 5.4 | (0.2) |
Exceptional Gain/(Loss) | (224) | 397 | 68.0 | nm | (82.9) |
Pre-tax Profit | 1,544 | 1,190 | 1,726 | 11.8 | 45.1 |
Tax | (44.2) | 41.2 | (209) | 373.5 | (608.8) |
Minority Interest | (281) | (212) | (244) | 13.2 | 15.3 |
Net Profit | 1,219 | 1,019 | 1,273 | 4.4 | 24.9 |
Net profit bef Except. | 1,443 | 622 | 1,205 | (16.5) | 93.6 |
EBITDA | 3,476 | 2,414 | 3,301 | (5.0) | 36.7 |
Margins (%) |
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Gross Margins | 18.5 | 18.8 | 19.7 |
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Opg Profit Margins | 5.5 | 3.1 | 5.8 |
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Net Profit Margins | 3.5 | 3.4 | 3.8 |
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