JPFA March2022

JPFA

Contact our analyst Eka

BUY, 29% upside.
7th March 2022
Price Rp 1,575
Target price Rp 2,030

Better QoQ Growth

In the 4Q2021, JPFA revenue increased +17% YoY or +31.6% QoQ to IDR 12.07 trillion due to higher Volumes & ASPs in all businesses.
Previously in 3Q2021, JPFA sales dropped because of a significant drop in demand for poultry which led to broiler prices falling below cost. For 2021FY, JPFA sales recorded double digit growth of +21.4% YoY to IDR 44.8 trillion in line with higher volumes & ASPs compared to 2020.
Commercial farms contributed IDR 4.8 trillion up +14% YoY or +21% QoQ. The growth was due to higher live bird sales volume, +14% YoY and an ASP increase of +21% QoQ in 4Q2021.
Feed sales increased +21% YoY to IDR 3.45 trillion inline with a volume increase of +8% YoY in 4Q2021.
DOC sales decreased -6.6% YoY but slightly increased +1.3% QoQ to IDR 618 billion, while DOC’s ASP continued to improve with +6% YoY growth and volume grew by 6% YoY.
We are expecting JPFA’s sales will reach IDR 49,3 trillion in 2022F as demand recovers.

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Expecting Lower Margins

In March 2022, commodity prices have jumped because of tensions between Rusia and Ukraine. This may disrupt supply chains, global shipping costs, and consumer purchasing power. JPFA’s raw materials such as Soy Bean Meal (SBM) and Corn have seen higher prices since December 2021 until now.
Omicron cases also will impact purchasing power in 1Q2022.
With these global external factors affecting 2022, we expect JPFA’s margins will fall from higher costs of goods sold and operating expenses.

Bottom line Recovery in 4Q2021

In 4Q2021, JPFA booked a net profit of IDR 515 billion, after a loss in 3Q2021 from a recovery in ASPs and volume. For 2021FY, JPFA’s profit increased sharply +121% to IDR 2.02 trillion with a higher NPM of 4.5% from 2.5% in 2020.
JPFA 4Q2021 gross profit increased by a triple-digit +182% QoQ but was still lower -22% YoY at IDR 2.08 trillion with a higher gross profit margin of 17.2% from 6.9% in 3Q2021.
Operating profit reached IDR 871 billion, in line with a stronger OPM in 4Q2021 of 7.2% from 0.7% in 3Q2021.
With an uncertain global economy amid higher tensions and pandemic cases, we are expecting JPFA’s 2022F profit will rise slightly, 2% YoY, to IDR 2.06 trillion.

Valuation: Maintain BUY with TP 2,030

Using a DCF valuation with WACC of 12%, we are targeting JPFA to trade at a 9.4x 2023F PE within a year. Target Price is IDR 2,030 which represents 29% upside. We maintain our recommendation to BUY.

Previously

JPFA Nov2021