JPFA Aug2021

JPFA

Contact our analyst Eka

BUY, 56% upside.
2nd August 2021
Price Rp 1605
Target price Rp 2,500

Volume and ASPs Increase

In 2Q2021, JPFA booked double digit revenue growth of +40% YoY to IDR 11.3 trillion due to higher Volumes & ASPs YoY & QoQ in all businesses. The higher ASP proves recent government culling initiatives have successfully achieved supply and demand balance plus there was increased demand during Lebaran.
For 1H2021, JPFA also recorded double digit growth of +24% YoY to IDR 22.1 trillion.
Commercial farms contributed IDR 4.44 trillion up +33% YoY or +4% QoQ, the highest contribution to JPFA revenue at 38.4% in 2Q2021. The growth was from higher live bird ASPs, up +7.3% QoQ +19% YoY together with higher sales volume +2.7% QoQ +26% YoY.
For Feed, the ASP still declined while volume recorded +25.5% growth in 2Q2021. As a result, feed’s sales increased +44% YoY to IDR 3.26 trillion. For 1H2021, feed recorded sales growth of +17.4% to IDR 6.47 trillion.
The DOC segment also had double digit growth in ASP of 32% YoY and volume 43% YoY with DOC sales of IDR 688 billion.
We are expecting 2021 demand will continue to recover in line with a recovery in Indonesian private consumption.

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Higher Margin

In 2Q2021, JPFA booked net profit of IDR 627 billion after a loss of IDR -78 billion in 2Q2020. For 1H2021, JPFA’s profit rise sharply +421% to IDR 1.54 trillion. As a result, NPM was higher at 7% from 1.6% in 1H2020.
JPFA 2Q2021 gross profit increased double-digit +67.5% YoY to IDR 2.4 trillion in line with a higher gross profit margin of 21% from 12% in 2Q2020.
Operating profit also grew +2544% YoY to IDR 1.25 trillion from IDR 47 billion, in line with a stronger OPM in 2Q2021 of 11% from 0.6% in 2Q2020.
We revise our forecasts as JPFA has been building upward momentum since 1Q2021 with a stronger result for the 1H2021. We are expecting JPFA’s 2021F profit will rebound with 167% YoY growth to IDR 2.44 trillion.

Valuation: Maintain BUY with TP 2,500

Using a DCF valuation with WACC of 14.3%, we are targeting JPFA to trade at 10.4x 2022F PE within a year. Target Price is IDR 2,500 which represents 56% upside. We maintain our recommendation to BUY.

Previously

JPFA May2021