JPFA Mar2021

JPFA

Contact our analyst Eka

BUY, 26% upside.
2nd March 2021
Price Rp 1,580
Target price Rp 2,000

Demand Increased in 4Q2020

JPFA’s performance continued to recover in 4Q2020. JPFA 4Q2020 revenue increased +2.9% YoY to IDR 12.04 trillion and grew an even stronger +50.2% QoQ.
For 2020FY, JPFA’s revenue still decreased -4.9% YoY to IDR 36.96 trillion because of weak 2Q2020 and 3Q2020 results.
However, the revenue achievement is above our expectation for 2020F at IDR 35.7 trillion.
Sales volume in all of JPFA’s business segments showed an improvement QoQ with DOC’s sales volume up +5.3%, Livebirds +3%, Feed +10.4% and aquaculture +9.3%.
The reduction in supply recommended by the government also helped to improve 4Q2020 prices.
We are expecting 2021 demand will continue to recover in line with a recovery in Indonesia private consumption.

2020FY Results: Above Expectation

JPFA booked net profit of IDR 659 billion in 4Q2020 up +549% QoQ but still lower -9% YoY. For 2020FY JPFA net profit decreased -48% YoY to IDR 917 billion because of the covid-19 outbreak effect in 2Q2020 and 3Q2020. This resulted in a lower net profit margin of 2.5% in 2020. However net profit in 2020 was above our expectation at IDR 435 billion.
JPFA 4Q2020 gross profit increased slightly +6% YoY and 152% QoQ to IDR 3.3 trillion in line with a higher gross profit margin of 27.7% from 16.5% in 3Q2020.
Operating profit also grew +31% YoY and 260% QoQ to IDR 1.46 trillion, in line with a stronger OPM in 4Q2020 of 12.1% from 5.1% in 3Q2020.
We are expecting JPFA’s 2021F profit will rebound with 96% YoY growth to IDR 1.79 trillion from a demand recovery as the vaccine program is on schedule.

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New Contribution

The acquisition of PT So Good Food (SGF) in 2020 give a significant contribution to JPFA. We estimate SGF will contribute in the range of IDR 240 bn -260 bn for a full year or 13% - 15% of JPFA’s profit in 2021F.
The new normal is changing consumer’s purchases towards processed food which resulted in a positive impact to SGF. In 2020, with frozen products under So Good brands increasing more than 10% YoY.

Valuation: Upgrade to BUY with TP 2,000

Using a DCF valuation with WACC of 12.4%, we are targeting JPFA to trade at 12x 2022F PE within a year. Target Price is IDR 2,000 which represents 26% upside. We upgrade our recommendation to BUY.

Previously

JPFA Nov2020