Following RHB's recent report ), CGS-CIMB has a preview of Japfa's 3Q results.


Excerpts from CGS-CIMB report

Analyst: Cezzane See

Swine and raw milk mitigate Indo poultry
■ Average Jul-Aug 20 Vietnam swine prices were still above VND75k/kg while China raw milk prices in 3Q20 were also higher qoq.

JAPFA

Share price:
65 c

Target: 
96 c

■ Steady prices seen in these two segments likely helped to mitigate the weak Indonesia poultry business in 3Q20F, in our view.

■ We continue to like JAP’s prospects for the year.

Reiterate Add with an unchanged TP based on 12x FY21F EPS (close to 4-year average mean).


Vietnam swine prices still high
According to Charoen Pokphand Foods (CPF TB, Add, TP: THB39.75), Vietnam swine prices rose to an average of VND80k/kg (Fig 1) in Jul-Aug 20 (up >100% yoy).

CPF’s management believes Sep 20 prices were still high at VND75k-80k/kg.

This implies a still-strong 3Q20F, in our view, with the Animal Protein Other (APO) segment EBIT having already posted an earnings turnaround in 2Q20, from a loss in 2Q19.

China raw milk prices steady
Japfa CEOJapfa CEO Tan Yong Nang. Photo: Company3Q20 average China’s raw milk prices (as at 23 Sep) of Rmb3.7/kg was up c.3.9% qoq and 2.3% yoy, lending a positive bias to JAP’s dairy segment, whose EBIT had already risen by c.21% yoy to US$19.6m in 2Q20 (2Q19:US$16.2m).

Indonesia poultry still weak
According to JAP, average 3Q20 day-old chick (DOC) prices fell c.20% to c.Rp3.3k, while average 3Q20 broiler prices were down to Rp14.6k (-c.13% yoy).

Our Indonesia team believes weak disposable income in Indonesia due to the ongoing impact of Covid-19 could cap the demand recovery for Indo poultry in 2H20F; moreover the oversupply issue within the broiler industry still exists.

We foresee 3Q20F and 2H20F prospects remaining weak for this segment.

3Q20F preview
We expect JAP to report a 3Q20F EBIT of c.US$62m (up c.28% yoy), led by strong earnings from its APO and dairy segments.

We see 3Q20F core net profit growing 123.0% yoy to US$26.3m, with the benefits of the higher EBIT being further upheld by lower effective taxes and MI (Indo poultry carries the most leakage).

We adjust our FY20-22F core EPS forecasts marginally, post some housekeeping adjustments, especially within the Indonesia poultry business.

Maintain Add; diversification bears fruit
CezzaneSee "Potential catalysts are better poultry, Vietnam swine and dairy operating metrics. Downside risks are the reverse, as well as higher corn prices."

-- Cezzanne See, analyst
With the Vietnam swine and China raw milk segments mitigating the weakness in the Indonesia poultry segment, we reiterate our positive view on JAP and keep our Add call.

Our TP is maintained at S$0.96, still based on 12x CY21F P/E (close to JAP’s 4-year average mean).


Full report here. 

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings2.650-0.080
Avi-Tech Electronics0.265-
Best World1.700-0.120
Broadway Ind0.087-0.002
China Sunsine0.385-
ComfortDelGro1.370-
Delfi Limited0.955-0.075
Food Empire1.430-0.020
Fortress Minerals0.2700.005
Geo Energy Res0.335-0.055
GSS Energy0.027-0.002
Hong Leong Finance2.480-0.010
Hongkong Land (USD)3.2800.020
InnoTek0.4400.005
ISDN Holdings0.330-0.010
ISOTeam0.035-
IX Biopharma0.041-
Jiutian Chemical0.025-
KSH Holdings0.250-
Leader Env0.052-
Medtecs Intl0.133-0.001
Nordic Group0.340-0.010
Oxley Holdings0.0910.001
REX International0.1230.002
Riverstone0.725-0.015
Sinostar PEC0.1420.004
Southern Alliance Mining0.600-
Straco Corp.0.515-
Sunpower Group0.2250.005
The Trendlines0.083-0.001
Totm Technologies0.024-0.001
Uni-Asia Group0.8500.010
Wilmar Intl3.340-0.020
Yangzijiang Shipbldg1.7400.070
 

We have 2550 guests and no members online

rss_2 NextInsight - Latest News