JPFA March 2024

JPFA

Contact our analyst Eka

Buy, 33% upside.
6th March 2024
Price Rp 1165
Target price Rp 1550

Lower Feed Margin

In 4Q2023, JPFA's sales maintained double-digit growth of +10.1% YoY and a slight decline of -1.5% QoQ, to IDR 13.4 trillion due to higher sales volume in all business segments. For 2023, JPFA's sales increased by +12.3% to IDR 51.2 trillion due to higher sales volume.
Feed sales increased by +6.2% YoY or +8.1% QoQ to IDR 3.76 trillion, with sales volume increasing by +9.4% YoY or +5% QoQ in 4Q2023. With a higher corn price due to the long dry season, JPFA’s feed margin decreased in 4Q2023 to 16.7% compared to 24% in 3Q2023, as JPFA continued the process of passing on raw material cost increases to selling prices. Feed sales for 2023 slightly decreased by -1.2% YoY to IDR 13.8 trillion, with a higher sales volume of +3.4% YoY, and the feed operating profit margin was higher at 19.8%.
The commercial farm segment's sales maintained double-digit growth of +19.3% YoY but declined -4.0% QoQ, reaching IDR 5.62 trillion, driven by an increased sales volume of +16.8% YoY. The operating profit margin for the commercial farm segment was still negative in 4Q2023 at -10.3% due to lower live bird prices in the market.
Sales in the poultry processing and consumer products segment increased by +8.6% YoY to IDR 2.03 trillion, with a higher operating profit margin at 10.9%, up from 5.6% last year.
The DOC business segment was back to a negative margin at -5.6% on lower DOC prices in the market while sales volume increased by 12.7% YoY in 4Q2023, resulting in lower DOC sales by -3.6% YoY or -13.1% to IDR 619 billion. DOC and broiler prices, which have been prone to large fluctuations in demand and supply in the market, were back to a downtrend in 4Q2023, but have started to improve in early 2024 as demand increased ahead of the fasting period.

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4Q2023: margin decline

In 4Q2023, JPFA booked a loss of IDR 7 billion from a profit in 3Q2023 but slightly improved compared to a loss in 4Q2022 of IDR 8 billion.
For 2023, results are still affected by weak performances in 1Q2023 and 4Q2023, with net profit down by -34% YoY to IDR 931 billion.
The cost of sales increased by +11% YoY or +7% QoQ, reaching IDR 11.8 trillion, resulting in a lower gross profit by -38% QoQ to IDR 1.59 trillion with a lower gross profit margin of 11.9% in 4Q2023.
Despite the fluctuations in demand and supply, JPFA is expected to achieve top-line sales and bottom-line profit of IDR 57.4 trillion and IDR 1.5 trillion, respectively, for 2024F.

Valuation: Maintain BUY with lower TP 1,550

Based on a DCF valuation with a WACC of 8.8%, our target for JPFA is IDR 1,550, representing a 33% upside and an 11X 2025F PE. We maintain our BUY rating.

Previously