During the first three months of the year, San Miguel Corporation (SMC) managed to book a surprising 15x growth in its NI at P17.17bn, owing to the sequential improvement across its core business units, higher JV and associates-generated NI, better margins, and CIT benefits arising from CREATE law.

Although, on a year-on-year basis, the lingering pandemic impact can still be felt in PCOR, and SMC’s unlisted segments’ topline generation. This, however, was partially offset by the sustained strong volume recoveries in SMB and Food Division, and expansion in GSMI of FB. Overall, leading to a topline print of P201.16bn, down by -6.03% y/y.

For this year, SMC has set aside roughly P100bn in capex, likely because of the conglo’s more optimistic outlook this year. The set-aside amount will be mainly used for its big-ticket projects like its Bulacan airport, PAREx, and capacity expansion across its businesses—making us believe that a strong rebound could take place this year.

Summing it all up, we share the optimistic view of the management towards SMC’s 2021E performance. The main growth drivers that we see would come from FB’s Food Division, GSMI, and SMC Global. Meanwhile, we expect PCOR and Infra to reach pre-pandemic levels by 2022E, with the assumption that mobility restrictions would be taken out as the nationwide vaccination program continues to be rolled out. Hence, we raise our TP to P155.00 per share of SMC, still with a BUY rating.

Technical Analysis

SMC is starting to consolidate following its more than two-week long steady descent in mid-Jun. Last Friday, the stock plunged to as low as 115.70. Fortunately enough, bargain hunters entered at MOC pushed SMC to close at its session high of 118.00–strengthening the bullishness of the indicators. MACD’s histograms are steadily increasing, while RSI shows strong bullishness and still far from approaching overbought level. Given the stock’s low volatility and sliding buying pressure, it looks like SMC is bound to be range traded from 116.30 (MA50) to 118.60 (MA100), short- to medium term.

Trade the range.

Support: 116.30 / 115.00
Resistance: 118.60 / 121.00

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