JPMorgan upgrades Berli Jucker stock rating to Neutral on valuation

JPMorgan has upgraded Berli Jucker PCL (BJC:TB) to Neutral from Underweight, despite lowering its price target to THB18.00 from THB21.00. This upgrade reflects the stock's significant underperformance against the SET index and its current undervaluation near a 52-week low (P/B 0.58), with JPMorgan believing the weak earnings growth outlook is already priced in. While the company reduced its near-term margin guidance, it projects stronger sales growth in H2 2025, and JPMorgan sees long-term benefits from Mini BigC store optimization despite potential short-term challenges.

Analysis

JPMorgan has upgraded Berli Jucker PCL (BJC:TB) to Neutral from Underweight, a move primarily driven by valuation after significant underperformance. The stock has lagged Thailand's SET index by 17% in the past month and 15% year-to-date, and is currently trading near its 52-week low with a price-to-book ratio of 0.58. Despite the rating upgrade, JPMorgan lowered its price target to THB18.00 from THB21.00, reflecting a cautious fundamental outlook. The bank believes that at a 14 times one-year forward price-to-earnings ratio, the market has already priced in the company's weak earnings growth prospects. This view is supported by Berli Jucker's own revised guidance, which cut expected margin expansion to 10-20 basis points from a prior 20-40 basis points. Counterbalancing this near-term pressure is management's optimism for stronger sales growth in the second half of 2025 and the potential for long-term benefits from the optimization of its Mini BigC stores, which may present short-term challenges.

Key Decisions for Investors

• Given the upgrade to Neutral and the assessment that weak earnings are priced in, investors may consider holding existing positions as the risk/reward profile has become more balanced near the 52-week low.
• Value-oriented investors could view the current price-to-book ratio of 0.58 as an attractive entry point, but should be aware of the company's reduced margin guidance and potential short-term headwinds from store optimizations.
• Investors should closely monitor sales growth momentum in the second half of 2025, as achieving the company's optimistic guidance is a key potential catalyst to offset the weaker margin outlook.
• The lowered price target to THB18.00, based on FY2026 earnings, suggests that any potential share price recovery is expected to be a long-term process, requiring patience.