JPFA
Contact our analyst Eka
Buy, 30% upside.
8th August 2023
Price Rp 1245
Target price Rp 1615
8th August 2023
Price Rp 1245
Target price Rp 1615
Much higher prices
- Broiler and DOC prices experienced a hike after a drop in early 2023, thanks to government initiatives to manage demand and supply of DOC through culling in the first half of 2023.
- As a result, JPFA's performance improved in the second quarter of 2023.In 2Q2023, JPFA achieved stable sales of IDR 12.4 trillion, showing a positive growth of +5.4% compared to 1Q2023.
- The commercial farm segment played a significant role in JPFA's sales, contributing IDR 5.37 trillion, with growth of 7.6% QoQ or +20% YoY, driven by increased sales volume of 7.2% YoY. The operating profit margin for the commercial farm segment also rose from negative in 1Q2023 to 6.4% in 2Q2023.
- Sales in the poultry processing and consumer products segment increased by +4.1% YoY to IDR 1.94 trillion, maintaining a stable operating profit margin at 2%.
- However, feed sales decreased -7.7% YoY or -14.4% QoQ to IDR 3.03 trillion due to a decline in sales volume by -3.5% YoY. Despite this, feed sales for 1H2023 still increased by +6.2% YoY to IDR 6.5 trillion, with a slightly lower sales volume of -0.2% YoY, and the feed operating profit margin remained higher at 19.4% in 1H2023.
- Amid the culling in 1H2023, DOC prices spiked by +287% from the lowest in January to June 2023, while livebird prices increased by +38% from the January low. The expectation is that JPFA's performance in 2H2023 will be better as prices are expected to remain higher due to increased demand.
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2Q2023: Positive profit margin
Valuation: Maintain BUY with TP 1,615
- In 2Q2023, JPFA achieved a positive net profit margin of 2.7% after experiencing a negative margin in 1Q2023. The net profit for 2Q2023 amounted to IDR 332 billion, compared to a loss of IDR 250 billion in 1Q2023, resulting in a positive net profit of IDR 82 billion in 1H2023.
- Although gross profit significantly increased by +61% QoQ, it was still lower by -8.6% YoY, reaching IDR 2.07 trillion, primarily due to slightly lower costs of sales by -1% QoQ. This led to an improved gross profit margin of 16.7% in 2Q2023. The expectation is that raw material prices will soften in 2H2023 after reaching their highest point in 2022.
- Anticipating increased demand in 2H2023 to boost livebird and DOC prices, coupled with lower commodity costs (corn and SBM), JPFA is expected to achieve a top-line and bottom-line profit of IDR 54.1 trillion and IDR 1.5 trillion, respectively, for 2023.
Valuation: Maintain BUY with TP 1,615
- Based on a DCF valuation with WACC of 7.7%, our target for JPFA's stock is IDR 1,615, representing 30% upside and a 12X 2024F PE. We recommend a BUY rating.
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