JPFA
Contact our analyst Eka
HOLD, 19% upside.
1st February 2023
Price Rp 1350
Target price Rp 1600
1st February 2023
Price Rp 1350
Target price Rp 1600
Sales better YoY
- After a decline in 3Q2021, JPFA had YoY sales growth in 3Q2022 of +15% to IDR 12.3 trillion, which is slightly lower -0,2% QoQ. For 9M2022, JPFA sales increased +12% YoY to IDR 36.79 trillion due to higher sales volumes and prices across poultry and aquaculture operations.
- Commercial farms contributed IDR 4.03 trillion to total sales, up +14.8% YoY driven by higher live bird sales volume and price but lower -7.3% QoQ due to a lower price.
- Feed sales increased +9.1% YoY or +8.6% QoQ to IDR 3.56 trillion with higher prices.
- DOC sales increased +22% YoY or +21% QoQ to IDR 746 billion due to higher DOC prices in 3Q2022.
- We are expecting more pressure in the commercial farm segment in 4Q2022 as livebird and DOC prices decreased in 4Q2022 with the lowest prices coming in October 2022 with livebird at IDR 16,258 -14% YoY and DOC at IDR 2,890 or -51.6% YoY.
- The feed segment will continue to be strongest for JPFA because of higher prices while commodity price costs such as soybean meal and corn softened in 4Q4022.
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Expecting lower margin
Valuation: HOLD with TP 1,600
- JPFA margins are expected to decline from lower livebird and DOC prices in 4Q2022. In 3Q2022, JPFA booked a lower net profit margin of 2.6% although this is an improvement from -0.3% in 3Q2021. For 9M2022, JPFA still had a lower NPM of 3.9% compared to 9M2021’s 4.6%.
- In 3Q2022, JPFA booked a net profit of IDR 317 billion down by -38% QoQ but higher compared to a loss in 3Q2021.
- Gross profit also decreased by -23% QoQ to IDR 1.74 trillion due to higher costs of sales, up +5% QoQ. This resulted in a lower gross profit margin of 14.2% from 18.4% in 2Q2022.
- As we expect more pressure on the commercial farm segment margin due to declines in 4Q2022 livebird prices, we revise down our bottom line target for 2022 to IDR 1.5 trillion, a decreased of -26% YoY.
Valuation: HOLD with TP 1,600
- Using a DCF valuation with WACC of 10.5%, we are targeting JPFA to trade at a 9.8x 2023F PE within a year. Target Price is IDR 1,600 which represents 19% upside. We recommend to HOLD.
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