Poultry
Potential New Players in the Industry
- Danantara reportedly plans to fund Rp20tr investment in poultry farms to secure production of chicken and egg to support the MBG program.
- We believe strong execution is needed to employ such a large budget effectively and it would take time (2 years) to be fully integrated player.
- Despite the overhang, we maintain Overweight on the sector, with CPIN as our top pick and rebound in LB prices as ST catalyst.
Danantara potential involvement in poultry sector
Based on media report, Danantara plans to fund a Rp20tr integrated poultry farm project in collaboration with the Ministry of Agriculture (MoA), starting in Jan26. The project will focus on regions with chicken and egg supply shortages to support the Makan Bergizi Gratis (MBG) program and strengthen national food security. By developing an integrated farming system, it aims to boost poultry and egg production and stabilize market prices, preventing future protein shortages. According to MoA, MBG would require 700k ton of egg and 1.1mn tons of broiler. The latter tripled our FY26F estimate of 365mn kg of chicken meat, assuming full rollout of MBG program since beginning of the year.
Potential impact on existing integrators
While the initiatives are still in early stages, we analyze potential scenarios related to the poultry sector, especially in the broiler segment. If Danantara focuses on the downstream (commercial farming), it will have limited impact to supply-demand dynamics but might threaten existing commercial farms (c. 1-6% operating profit contribution). However, if Danantara aims to become a fully integrated player, it will become a potential competitor for existing integrators given the huge budget involved and more access to permits. But this would take time (2 years) and require strong execution to deploy such a large budget effectively. Note that integrators under our coverage spent capex of Rp19.6tr in 5 years (FY20-24).
Similar to Berdikari initiatives in 2018
Currently, Berdikari serves as one of the government’s key integrators in the food and livestock sector. According to the company, it imported c. 7.6k GPS in FY24 and has a quota of 15k in FY25, which doubled FY24’s realization. However, this is much less than its initial GPS import of c. 53k back in FY18. As of FY24, Berdikari operated Rp1.5tr of assets, including 2 GPS and 3 PS breeding farms.
Maintain Overweight with sustained LB price as catalyst
We maintain our Overweight rating on the poultry sector, as we expect earnings momentum to sustain in the near term given improving supply-demand environment. We continue to favor CPIN (Buy, TP Rp6,400) for its attractive valuation (-1.5SD) from 5-year average and underweight position. Risks to our view are further weakening purchasing power and supply disruption in raw materials.
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