Poultry
Bottoming-out Livebird Prices, Better Supply-Demand outlook in 2H25
- Chicken absorption from MBG program in FY25F to be minimal at 3.4%; full implementation may form 10% absorption in FY26 onwards.
- Slight underweight in local funds and rebounding LB prices from their bottom in mid-Apr25 should limit further downside risks.
- Maintain Overweight on poultry sector with CPIN as our top pick from cheaper historical valuation and better earnings outlook.
Lower-than-expected chicken absorption
Previously we estimated the MBG program would increase chicken absorption of 5.8% in FY25F and gradually increase to 30.6% by FY29F (see our report), which is based on 1.2 million tons of chicken meat per year when the program is fully rolled out. However, recent findings led to our new estimate of 10% chicken absorption upon the program’s full rollout as we estimate a lesser chicken meat portion of 50 grams per portion from 100 grams (1 piece of 8 pieces chicken cut) previously. Moreover, during the initial implementation, the number of recipients will gradually increase from 3 million in Apr25 to 82.9 million by Nov25, resulting in a mere 3.4% chicken absorption in FY25F.
Minimal demand impact in FY25F
Based on our calculations, we estimate that broiler meat absorption for the 2025 MBG program will reach approximately 119.5mn kilograms. Thus, demand from this program is projected to account for only around 3.4% of the total broiler meat production in 2025, which is estimated at approximately 3.6 million tons. This calculation assumes that chicken-based meals are served twice per week, with each serving containing 50 grams of chicken meat. Given the relatively low absorption rate, the program has positive but minimal impacts on the overall supply-demand dynamics of the poultry industry in FY25F.
Aside from higher LB prices, May25 industry data remained steady
In the early weeks of May25, livebird (LB) prices saw a notable 9% wow increase to an average of Rp17.4k/kg, reaching Rp18.2k/kg ahead of the Vesak festive season partly supported by the voluntary culling mandate. Day-old chick (DOC) prices remained stable at around Rp4.7k/chick. Local corn prices edged up slightly to Rp5.2k/kg following the post-harvest season, though the weekly average has been held flat at Rp5.1k/kg since mid-Apr25. Meanwhile, soybean meal (SBM) prices stayed below US$300/t, averaging US$288 in May25 (-1% mom; -22% yoy).
Maintain Overweight with better LB prices in 2H25
Given that LB prices have passed their bottom, potential higher LB prices from lesser supply and higher chicken absorption in 2H25, combined with still favorable feed costs, and an underweight position in local funds, we maintain an Overweight rating for the sector. We prefer CPIN due to its cheap valuation (-1.5SD from 5-year average), better earnings outlook, and underweight position. Risks to our view are further weakening purchasing power, supply disruption in raw material, and government intervention.
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