JPFA
Contact our analyst Eka
Buy, 53% upside.
6th November 2023
Price Rp 1245
Target price Rp 1900
6th November 2023
Price Rp 1245
Target price Rp 1900
Higher Feed Margin
- In 3Q2023, JPFA booked double-digit sales growth of +10.6% YoY or +9.8% QoQ, reaching IDR 13.4 trillion. For 9M2023, JPFA's sales increased by +2.6% to IDR 37.7 trillion.
- The feed sales increased by +15% QoQ but still decreased by -2% YoY to IDR 3.48 trillion, with sales volume increasing by +4% YoY or +18% QoQ in 3Q2023. On top of better sales, the feed business booked a higher margin at 24% as JPFA continued to pass on raw material price increases in JPFA selling prices. Feed sales for 9M2023 slightly decreased by -3.7% YoY to IDR 10.05 trillion, with a slightly higher sales volume of +1% YoY, and the feed operating profit margin remained higher at 21% in 9M2023.
- The commercial farm segment maintained double-digit growth of +26.4% YoY, reaching IDR 5.8 trillion, driven by increased sales volume of +13% YoY. While the operating profit margin for the commercial farm segment went back to negative in 3Q2023 at -2.2% but still better compared to 3Q2022’s -10% due to lower live bird prices in the market.
- Sales in the poultry processing and consumer products segment increased by +14.2% YoY to IDR 2.13 trillion, with a higher operating profit margin at 5.6%, up from 1.5% last year. The DOC business segment also recorded a higher margin at 82.6% due to a higher ASP by 6.3% YoY and higher sales volume by 26% YoY in 3Q2023, while DOC revenue grew +28.6% QoQ to IDR 712 billion.
- The DOC and broiler prices have been prone to large fluctuations of demand and supply in the market, starting in 2Q2023 and continuing in 3Q2023. We expect JPFA's performance in 2H2023 will be better as prices are expected to remain higher due to increased demand.
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3Q2023: Positive profit margin
Valuation: Maintain BUY with TP 1,900
- In 3Q2023, JPFA booked a triple-digit growth in net profit of +170% YoY or +158% QoQ, reaching IDR 855 billion, with a net profit margin reaching 6.3%, the highest in a year due to higher sales volumes and prices.
- For 9M2023, results are still affected by weak performance in 1Q2023, with 9M2023's net profit at IDR 937 billion, decreased by -34% YoY.
- The gross profit increased by +47% YoY or +28% QoQ, reaching IDR 2.5 trillion, with a higher gross profit margin of 18.8% in 3Q2023.
- Anticipating increased demand in 4Q2023 to boost live bird and DOC prices, JPFA is expected to achieve a top-line sales and bottom-line profit of IDR 54.1 trillion and IDR 1.6 trillion, respectively, for 2023.
Valuation: Maintain BUY with TP 1,900
- Based on a DCF valuation with a WACC of 8.5%, our target for JPFA's stock is IDR 1,900, representing a 53% upside and a 13X 2024F PE. We recommend a BUY rating.
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