Charoen Pokphand Indonesia (CPIN IJ)
1Q25 Earnings Beat: Margin Recovery in the Processed Food Business Supported Earnings
- CPIN posted 1Q25 net profit of Rp1.5tr (+16% qoq, +116% yoy) above our (35%) and cons’ (36%) FY25F, partly supported by normalized tax.
- Despite the lower qoq margin in the poultry business, NP was boosted by significant margin recovery in the processed food business.
- Maintain BUY with an unchanged TP of Rp6,800, as we maintain our FY25 EBITDA unchanged given the softer 2Q25 earnings outlook.
1Q25 earnings above expectations despite flat qoq operating profit
CPIN reported net profit of Rp1.5tr in 1Q25 (+16% qoq, +116% yoy), forming 35% of our and 36% of consensus FY25F — i.e., above expectations. Gross revenue rose 2% qoq and 8% yoy, while operating profit was relatively flat qoq (-2%). Despite the flat OP, bottom-line growth was supported by a normalized tax rate of 23% in 1Q25, down from an elevated 40% in 4Q24. Gross operating margin declined 108bps qoq to 6.9%, as margin contraction in the upstream business was partly offset by stronger margins in the processed food segment.
Pressure in upstream segment, margin recovery in processed food
DOC and broiler margins declined qoq despite the Eid festive period, due to lower ASP, though margins remained in positive territory. Feed revenue grew 8% qoq and 5% yoy, but margin declined to 7.9% in 1Q25 (from 9.7% in 4Q24), which we believe was due to higher volumes but lower ASP during the quarter. Meanwhile, processed food revenue grew modestly at 4% qoq and 1% yoy, while OPM expanded to 10.9%, likely supported by higher volume and lower livebird input costs.
Maintain FY25F unchanged on, risk in processed food margin
Despite the solid 1Q25 earnings, we maintain our FY25F unchanged, as we anticipate soft earnings in 2Q25 due to weaker-than-expected demand, before expecting demand to normalize in 2H25, supported by the lower supply outlook. Despite the strong recovery in the processed food margin, we remain cautious on the continuity throughout FY25, as the oversupply condition may arise again.
Maintain Buy rating with a higher TP of Rp6,800
We maintain our FY25F est. and valuation unchanged, and hence maintain our TP at Rp6,800 and BUY rating. Our TP is derived from 5-year EV EBITDA average of 14.9x to FY25F, implying 25x PE. Risks to our view are persistent oversupply, government intervention, and reversal in processed food margin.
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