MAIN Jan2022

MAIN

Contact our analyst Eka

BUY, 28% upside.
19th January 2022
Price Rp 660
Target price Rp 845

Top 3 in poultry sector

MAIN maintained their top 3 position in poultry feed in 2021 with an 8% market share, up from 7% in 2020.
MAIN revenue of IDR 6.7 trillion was up 37% YoY from 9M2020. Most of MAIN’s revenue came from feed at 64% of total revenue or IDR 4.29 trillion in 9M2021, up +31.5% YoY. The 2nd largest contribution was Day-old Chicks at 18% of total revenue or IDR 1.2 trillion, up +48.1% YoY. Broiler sales contributed 14% of total sales or IDR 937 billion, up +46.7% YoY and processed chicken contributed 2% of total sales or IDR 138 billion.
In 3Q2021, MAIN recorded an increase of +17.6% YoY to IDR 2.13 trillion in revenue but that is lower QoQ by -12.2%. The decrease was due to a drop in demand in line with lower prices of DOCs and broilers because of a peak in covid-19 cases in June-July. DOCs decreased the most QoQ -24.7% but were higher by 13% compared to 3Q2020.
We expect better demand in 4Q2021 and a continued recovery in 2022 from the easing of PPKM movement restrictions.

EBIT Margin Drop

Because of lower demand and lower prices in 3Q2021, EBIT margins for all businesses dropped.
DOC and broiler prices fell below cost in 3Q2021, resulting in negative EBIT margins in these businesses.
Only feed had a positive EBIT margin of 2.6% which is lower compared to 3Q0202’s 11.8%. The Broiler margin was -22% from 0.3% in 2Q2021, DOC -15% from 11% in 2Q2021. Processed chicken EBIT margin was -23.4% in 3Q2021.
In 4Q2021, we expect stronger prices and a recovery in the broiler price back above cost, while we still expect a challenging environment for DOC prices.

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Commodities prices remain high

With a hit from lower demand and lower prices, higher commodity price also weighed on MAIN’s bottom line.
MAIN recorded a higher cost of sales in 3Q2021, up +28.8% YoY to IDR 2.15 trillion. This resulted in a negative gross profit of IDR -14 billion. MAIN also booked a net loss of IDR -110 billion.
In 9M2021, MAIN cost of sales grew +36% YoY to IDR 6.27 trillion. MAIN’s raw material costs increased +40% YoY to IDR 5.64 trillion. This resulted in an increase in gross profit +15.7% YoY to IDR 440 billion.
MAIN booked a profit of IDR 19 billion in 9M2021, after a loss in 9M2020 of IDR -32 billion.
We are expecting better 4Q2021 results, and a profit of IDR 41 billion in 2021F.

Valuation: BUY with TP 845

As we expect higher demand with better prices in 2022, We are targeting MAIN to reach IDR 845 or 28% upside, which is a 21x PE valuation within one year. BUY.

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