JPFA Nov2021

JPFA

Contact our analyst Eka

BUY, 26% upside.
1st November 2021
Price Rp 1,725
Target price Rp 2,170

3Q2021 growth YoY

In 3Q2021, JPFA maintained double digit revenue growth of +25% YoY to IDR 9,1 trillion due to higher Volumes & ASPs YoY in all businesses., although QoQ, JPFA’s 3Q2021 sales decreased -19%. The PPKM in June – July caused a significant drop in demand for poultry and broiler prices fell below cost in 3Q2021.
For 9M2021, JPFA still recorded double digit growth of +23% YoY to IDR 32.8 trillion.
Commercial farms contributed IDR 4.0 trillion up +45% YoY but -9.2% QoQ. Live bird sales volume grew +19% YoY but the ASP fell bellow cost.
For Feed, the ASP improved inline with a volume increase of +17% in 3Q2021. As a result, feed’s sales increased +33% YoY to IDR 3.26 trillion. But the margin was depressed from higher raw material prices and shipping costs.
The DOC segment had double digit growth in ASP of 32% YoY and volume grew by 8% YoY resulting in DOC sales of IDR 610 billion, up 14% YoY.
We are expecting 2021 demand will continue to recover, but there will be higher raw material costs which will depress margin.

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A loss in 3Q2021, while 9M2021’s margin still increased

In 3Q2021, JPFA booked a net loss of IDR -36 billion, after a profit in 2Q2021. The loss in 3Q2021 was a result of higher raw material costs and the broiler price falling bellow cost.
However JPFA’s profit increased sharply +486% to IDR 1.5 trillion in 9M2021. As a result, NPM was higher at 4.6% from 1% in 9M2020.
JPFA 9M2021 gross profit increased by a double-digit +25% YoY to IDR 5.9 trillion in line with a higher gross profit margin of 18.1% from 17.8% in 9M2020.
Operating profit also grew +111% YoY to IDR 2.65 trillion, in line with a stronger OPM in 9M2021 of 8.1% from 4.7% in 9M2020.
Due to the lower than expected 3Q2021 JPFA results, We revise our 2021 JPFA forecast. We are now expecting JPFA’s 2021F profit will rise 76% YoY growth to IDR 1.6 trillion.

Valuation: Maintain BUY with TP 2,170

Using a DCF valuation with WACC of 13%, we are targeting JPFA to trade at 12.5x 2022F PE within a year. Target Price is IDR 2,170 which represents 26% upside. We maintain our recommendation to BUY.

Previously

JPFA Aug2021