JPFA Nov2024

JPFA

Contact our analyst Eka

Buy, 34% upside.
1st November 2024
Price Rp 1830
Target price Rp 2450

Higher sales volume Across all business segment

Despite adjustments in feed prices and lower DOC and broiler prices in Q3 2024, JPFA’s performance decline was not as severe as expected. The company recorded a slight 0.1% YoY increase in sales, reaching IDR 13.61 trillion in Q3 2024, driven by higher sales volumes across all business units. For 9M 2024, revenue reached IDR 41.3 trillion, reflecting a 9% YoY growth.
The feed segment’s operating margin declined to 17.9% in Q3 2024, down from 24% in Q3 2023, primarily due to a 7.7% YoY drop in average selling prices (ASP), aligned with lower raw material costs, especially for soybean and corn. Corn prices, which heavily influence feed costs, fell from a peak of IDR 7,000 in January to IDR 4,400 in October. Despite this, feed sales volume grew by 7.8% YoY, boosting sales by 4.4% YoY and 7.3% QoQ to IDR 3.64 trillion.
The commercial farm segment experienced a 6.6% YoY decline in sales to IDR 5.46 trillion, despite a 4.3% YoY increase in sales volume. The decline was driven by an 11.4% YoY drop in livebird prices, resulting in a negative operating profit margin of -0.3% in Q3 2024. However, for 9M 2024, commercial farm revenue increased by 8.9% YoY to IDR 17.08 trillion, with a positive operating profit margin of 3.9% due to reduced feed costs.
The poultry processing and consumer products segment posted a 3.8% YoY sales increase to IDR 2.22 trillion, with an improved operating profit margin of 2.9%.
Meanwhile, DOC revenue grew by 11% YoY to IDR 790 billion, with a strong operating profit margin of 47.7%, driven by a 4.8% increase in DOC sales volume despite a 15.6% YoY ASP decline.
The supply and demand for live birds and DOC in the domestic market are expected to remain stable in Q4 2024, with demand anticipated to rise in 2025, supported by a free lunch program.

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Quarterly Decline Amidst Triple-Digit Year-to-Date Growth

With lower ASPs, JPFA’s net income fell by 28% YoY to IDR 615 billion in Q3 2024. Nevertheless, the company maintained a 124% increase in net income year-to-date, reaching IDR 2.09 trillion, boosted by the exceptional performance in Q2 2024.
The cost of sales remained stable at IDR 11.04 trillion, thanks to lower raw material costs in Q3 2024. Gross profit grew slightly by 0.9% YoY to IDR 2.58 trillion, resulting in a gross profit margin of 19%, up from 18.8% in Q3 2023. Operating profit stood at IDR 1.04 trillion, marking a 22% YoY decline, with the operating profit margin at 7.7%.
We expect bottom-line profit to reach IDR 2.7 trillion this year, with margins improving as feed costs continue to decrease in line with lower raw material prices.

Valuation: Maintain BUY with TP 2,450

Our DCF valuation, using a WACC of 10%, yields a target price of IDR 2,450 for JPFA, implying a 36% upside and a 9x 2025F PE ratio. We maintain our BUY rating.

Previously