Japfa Comfeed Indonesia (JPFA IJ)
1Q24 earnings beat; Strong margins supported by the livebird, DOC and feed segments
- JPFA booked 1Q24 net profit of Rp665bn, beating our FY24F and consensus estimates on strong operating margins.
- The strong margins were supported by resilient feed margins (+105bps qoq) and a turnaround in livebird and DOC margins from higher ASP.
- We upgrade our rating to Buy (from Hold prev.) on higher EBITDA with a higher TP of Rp1,500 as we raise our FY24-25F estimates.
Strong 1Q24 net profit from high operating margins
JPFA booked strong net profit of Rp665bn in 1Q24 (94% of CPIN`s 1Q24 NP), a huge turnaround from net losses on both a yoy and qoq basis. The 1Q24 NP beats our FY24F and consensus estimates at 63% and 52%, respectively. The strong 1Q24 earnings were driven by a combination of solid revenues, strong operating margins, and lower financing costs. Gross revenue grew 4% qoq to Rp21.7tr in 1Q24 (+17% yoy) with a strong operating margin of 6.7% (+170bps, +317bps qoq), higher than its historical average at c. 6.0%.
Margins recovery in the livebird/DOC segments and resilient feed margins
The 1Q24 margins improvement was driven by the DOC and livebird segments as both segments` ASPs increased during the Ramadan month from higher demand and industry self-culling adjustments. Livebird OPM reported significant improvements to 4.5% (1Q23/4Q23: -8.5/-5.8%), and DOC OPM were at 12.6% (1Q23/4Q23: -24.5/-2.3%). Despite the higher local corn prices in 1Q24, feed’s OPM improved to 8.1% (+105bps qoq), but was still 112bps lower yoy. Feed contributed half of the consolidated 1Q24 operating profit. Processed food revenue grew by 2% qoq to Rp2tr (+11% yoy) with margins normalizing at 3.0% in 1Q24 from an unusually high of 11.1% in 4Q23.
We raise our FY24F/FY25F, reflecting the strong LB prices during Ramadan
We revise our livebird ASP by 1.5/2.8% for FY24F/FY25F on strong ASP during Ramadan, the self-culling adjustments, and lower GPS imports in FY24F. We raise our FY24F/FY25F net profit estimates by 34/51%, respectively.
Upgrade rating to Buy with a new TP of Rp1,500
We upgrade our rating to Buy (from Hold prev.) on a better supply-demand outlook. We raise our TP as we revise our FY24F EBITDA and retain our 7.4x EV/EBITDA multiple (5-year average), resulting in a TP of Rp1,500 (from Rp1,100 previously), implying 12x FY24F PE. Risks to our view include lower livebird prices from weak purchasing power and a lack of culling.
… Read More 20240502 JPFA
