Charoen Pokphand Indonesia (CPIN IJ)

FY23 results: Another year with a negative ending

 

  • CPIN booked 4Q23 net losses of Rp357bn, surpassing 4Q22’s net losses of Rp257bn driven by a lower feed margin and poultry business losses.
  • Despite the inline FY23 operating profit, we trim our FY24/FY25F net profit forecasts by -9/-5% on lower other income.
  • We downgrade our rating to Hold with a TP of Rp5,200 based on 15.4x FY24F EV/EBITDA (-1SD of 5-year avg), implying 29/21x FY24/FY25F PE.

Lower-than-expected FY23 net profit

CPIN booked core net profit of Rp327bn in 4Q23 resulting in FY23 core net profit of Rp2.4tr (-27% yoy). This is slightly lower than our estimate (94% of FY23F), with the reported net profit only forming 72% of consensus estimates. Despite 8% yoy top line growth, the lower net profit in FY23 was driven by a 53bps lower operating margin mainly due to lower DOC and processed food margins and lower other operating income.

 

A big reversal from 3Q23 due to lower revenues and margins

After the high base in 3Q23, CPIN’s net profits turned negative in 4Q23 with all segments reporting declining qoq margins. Gross revenues dropped by 9% qoq across all business segments but were mainly led by the decline in DOC revenues (-40% yoy), which we believe owed to both lower volume and ASP. The feed and broiler operating margins were 127bps and 577bps lower in 4Q23 due to rising costs and lower ASP during the quarter. The DOC and processed food segments recorded a operating margin reversal from positive to negative.

 

We lower our FY24/25F net profit estimates by -9/-5%

CPIN booked operating profits of Rp3.9tr (-6% yoy) in FY23, inline (at 103% of our FY23 est) but below consensus estimates (at 90%). However, the lower-than-expected other operating profits (caused by the absence of gains from culled birds), dragged down the net profit. Hence, we trim our FY24/25F net profit forecasts to take into account the lower other income.

 

Maintain TP at Rp5,200, but downgrade our rating to Hold (from Buy prev.)

With a slightly lower FY24F EBITDA forecast of Rp5.9tr (4% lower vs. our previous forecast), we maintain our TP at Rp5,200 based on 15.4x EV/EBITDA (-1SD of the 5-year average) to our FY24F EBITDA implying 29/21x FY24/FY25F PE ratios. Upside risks to our view are potential resumption of the culling programs and lifting of the ban on corn imports.

 

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