Agri-foods sector

Agri-Foods sector

US declares 2.09% CVD on shrimp imported from Thailand, still lower than rivals
The US announced it would impose 2.09% countervailing duties (CVD) on frozen
shrimp imported from Thailand. The reasons for the CVD given by the U.S.
Department of Commerce were that 1) Thai exporters already receive 0.13%
refund for the export duty from the Excise Department; 2) the BOI has been
supporting investments in the Thai shrimp industry, which made the cost of
production decrease 2%; and 3) the BOI has reduced machinery tax for the Thai
shrimp industry. However, the CVD imposition still has not been effective; the
final determination will be made on 14 August, so in the meantime Thailand will
have to explain and give additional information to the US during June 2013.
- Insignificant impact seen on Thai shrimp exporters: CFRESH, TUF, CPF
The CVD imposition is an additional measure apart from the existing anti-dumping
tariffs on shrimp exports to the US in order to help shrimp business entrepreneurs
in the US. However, an impact from the CVD imposition is preliminarily estimated
to be insignificant and close to the market’s projection, so Thai entrepreneurs
would still have competitive advantages over international peers which have to
pay higher import duties (62.74% for Malaysia, 10.87% for India, and 6.07% for
Vietnam, while only Indonesia and Ecuador receive the duty exemption). Overall,
such situation will have a negative effect on CFRESH whose whole income comes
from the shrimp export and the export to the US accounts for 10% of its total
income. At the same time, TUF, of which the shrimp export to the US accounts for
6% of its total income (including a subsidiary PPC), will have to pay higher duty.
Nevertheless, CPF that focuses mainly on exporting cooked shrimp might receive
very insignificant effect because its frozen shrimp export comprises no more than
1% of the total income (the shrimp businesses in Malaysia and Vietnam included).
We project that the CVD would affect our 2014’s net profit forecast of CFRESH,
TUF, and CPF respectively by 2.4%, 2.3%, and 1.7%.
- Share prices already show substantial responses. Top pick is CPF
We maintain our forecast and recommendation for stocks in the sector, believing
that the share prices of CFRESH, TUF, and CPF have already responded to the
negative factor from the U.S. import duty collection. In addition, the preliminarily
announced CVD was close to the market’s projection. We still choose CPF as a top
pick of the sector because a sign of better recovery has been foreseen for the rest
of the year; the shrimp business tends to improve gradually,while the livestock
business (chicken and swine) has brightened after domestic selling prices have
risen continuously.