JPFA Aug2024

JPFA

Contact our analyst Eka

Buy, 30% upside.
19 August 2024
Price Rp 1600
Target price Rp 2060

Growth Across All Business Segments

JPFA maintained double-digit sales growth of 10.7% YoY, reaching IDR 13.7 trillion in Q2 2024, continuing strong momentum after Lebaran in Q1 2024. This growth was driven by higher sales volumes across all business units and increased prices for broilers and day-old chicks (DOC). For 1H 2024, revenue reached IDR 27.65 trillion, showing a 14.5% YoY growth.
The feed segment continued to perform well, with sales increasing by 12.1% YoY but decreasing by 15.5% QoQ to IDR 3.39 trillion. This growth was fueled by a 13.3% YoY increase in sales volume, even though average selling prices (ASP) contracted by 3% YoY. However, JPFA's feed margins improved to 20.2% from 17.2% last year due to lower raw material prices, particularly for soybean and corn. Corn prices, which have the largest composition in feed, gradually declined from a peak of IDR 7,000 in January to IDR 4,400 in August.
The commercial farm segment posted a 9.3% YoY increase or 2.3% growth QoQ to IDR 5.87 trillion, driven by an 8.8% increase in sales volume and a higher ASP. The operating profit margin for this segment remained positive at 6.6% in Q2 2024, up from a 5.5% margin in Q1 2024, as live bird prices increased in the market due to lower supply, and culling also boosted prices.
The poultry processing and consumer products segment reported a 9.1% YoY increase in sales to IDR 2.11 trillion, with an improved operating profit margin of 5.8%.
DOC revenue jumped by 59.3% YoY or 22.4% QoQ to IDR 882 billion, with a higher margin of 52.4%, driven by higher DOC prices and a 30% YoY increase in sales volume.

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Q2 2024: Dramatic turnaround

After only booking IDR 7 billion in 1H 2023, JPFA's bottom line jumped by 1706% YoY to IDR 126 billion in 1H 2024, while Q2 2024 net income increased by 22.7% to IDR 815 billion. This increase was attributed to price improvements in both broilers and DOCs, along with lower raw material prices.
Cost of sales rose by 5% YoY but decreased by 5.3% QoQ to IDR 10.84 trillion, in line with a 6% YoY increase in raw material costs in Q2 2024. Gross profit surged by 39% YoY to IDR 2.88 trillion, with a higher gross profit margin of 21% in Q2 2024.
JPFA also reported an operating profit of IDR 1.5 trillion, a rise of 107% YoY, with a higher operating profit margin of 11.1%.
Based on these improvements, we have revised JPFA's 2024 forecast, now expecting bottom-line profit to reach IDR 2.8 trillion.

Valuation: Maintain BUY with TP 2,060

Our DCF valuation, using a WACC of 9.09%, sets a target price for JPFA at IDR 2,060, representing 30% upside and a 7.6x 2025F PE ratio. We maintain our BUY rating.

Previously