CPIN
Contact our analyst Eka
Hold, 10% upside
21st January 2021
Price Rp 6,400
Target price Rp 7,050
21st January 2021
Price Rp 6,400
Target price Rp 7,050
Sales Increases in 3Q2020
- CPIN recorded better sales in 3Q2020, both YoY and QoQ. CPIN 3Q2020 revenue increased +14.4% QoQ to IDR 15.68 trillion also up +9.5% YoY. For 9M2020, CPIN’s revenue decreased slightly -1.4% YoY to IDR 43.28 trillion due to lower sales in 1Q2020 and 2Q2020.
- Most of CPIN’s businesses (Feeds +20%, Broiler +13%, DOC +23%, others +3%) except for the processed chicken (-10%) showed single to double-digit growth QoQ.
- The Feeds business is still the biggest contributor to revenue at 47% in 3Q2020, followed by broiler 31%, DOC 11%, processed chicken 8% and others 3%.
- Demand in 3Q2020 increased as the PSBB restrictions were eased. We are expecting 4Q2020-2021 demand will gradually recover in line with a recovery of Indonesian private consumption.
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3Q2020: Margin decline
Valuation: TP 7,050, 10% upside
- CPIN booked net profit of IDR 628 billion in 3Q2020, down -25% YoY, -14% QoQ. The net profit margin dropped to 4% from 5.8% in 3Q2019 and 5.3% in 2Q2020.
- Cost of sales increased in like with sales by +12.5% YoY or 16.9% QoQ . With lower ASPs of broiler and DOC in 3Q2020.
- CPIN gross profit also decreased -3.5% QoQ to IDR1.65 trillion and the gross profit margin dropped to 10.5% from 12.5% in 2Q2020 and 13% in 3Q2019.
- Operating profit dropped -23.7% YoY and -10.6% QoQ to IDR 875 billion in line with a lower operating profit margin, 5.6% from 7.1% in 2Q2020.
- The positive sentiment from the PSBB transition in 3Q2020 couldn’t offset lower broiler and DOC prices. The supply adjustment by the government has not significantly improved prices in 3Q2020 but the price has increased in 4Q2020.
- We are expecting stable margins in 2021, and we expect single digit growth of CPIN’s sales to IDR 61.5 trillion and CPIN’s profit to IDR 3.4 trillion.
Valuation: TP 7,050, 10% upside
- As prices and demand are gradually improving, we are targeting CPIN to trade at 34x 2021F PE within a year. Target Price is IDR 7,050 which represents 10% upside. Our recommendation is HOLD.
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