JPFA
Contact our analyst Eka
BUY, 48% upside.
3rd August 2022
Price Rp 1475
Target price Rp 2185
3rd August 2022
Price Rp 1475
Target price Rp 2185
Higher single digit sales growth
- The disruptions in global economies, supply chains and resulting higher commodity prices have impacted to lower demand and higher costs in 2Q2022.
- In 2Q2022, JPFA revenue increased +8.7% YoY or +1.4% Q0Q to IDR 12.33 trillion, mainly from higher average selling prices (ASPs). For 1H2022, JPFA revenue reached IDR 24.48 trillion, up +10.7% YoY.
- Commercial farms contributed IDR 4.99 trillion to total sales, up +12.4% YoY or +7.8% QoQ mainly driven by higher live bird sales volume, +7.2% YoY and an ASP increase of +3.3% YoY in 2Q2022.
- Feed sales increased slightly +0.3% YoY to IDR 3.27 trillion inline with higher prices, up +32% YoY due to higher raw material costs. Sales volume declined by -3.9%YoY. The soybean meal price was higher in 2Q2022 inline with a higher USD to IDR exchange rate. This was partly offset by lower domestic corn price since May 2022.
- DOC sales declined again by -10.2% YoY to IDR 618 billion, negatively impacted by the drop of domestic DOC prices in 2Q2022.
- We are expecting JPFA sales in 2022F will reach IDR 50.7 trillion driven by higher prices.
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Lower margins
Valuation: Maintain BUY with TP 2,185
- Despite higher selling prices, the higher commodity prices resulted in higher raw material costs, up +17.5% YoY and shipping costs +22% YoY so 1H2022 margins were lower.
- In 2Q2022, JPFA booked a net profit of IDR 508 billion down by -16% QoQ and -26% YoY with the NPM dropping to 4.1% in 2Q2022 compared to 6.0% in 2Q2021.
- Gross profit also decreased by -6% YoY to IDR 2.26 trillion due to a higher cost of sales +13% YoY inline with higher raw material prices and shipping costs. This resulted in a lower gross profit margin of 18.4% from 21.2% in 2Q2021.
- As commodity prices and shipping costs have jumped, we expect JPFA's margins will contract in 2022F. For 2022F, we are expecting JPFA's profit will reach IDR 2.0 trillion.
Valuation: Maintain BUY with TP 2,185
- Using a DCF valuation with WACC of 11%, we are targeting JPFA to trade at an 11x 2023F PE within a year. Target Price is IDR 2,185 which represents 48% upside. We maintain our recommendation to BUY.
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