JAPFA LTD. (SGX:UD2)
Japfa Ltd - FY18: A Recovery Year
- Japfa’s FY18 core net profit (US$104.3m) was above, forming 110.5%/116% of our/consensus (US$94.4m/S$89.8m).
- This was mainly due to slightly lower interest and forex costs. EBIT (US$341.8m) was in-line, up 81% y-o-y on better poultry and swine earnings.
- Japfa is holding an analyst briefing later today.
- Maintain ADD with an unchanged SOP-based Target Price.
A recovery year
- JAPFA LTD. (SGX:UD2)’s FY18 EBIT growth of 81% y-o-y was mainly due to
- a stellar Indonesian poultry segment (US$256m);
- turn to profitability for its Vietnam other animal protein (APO) segment (US$33.1m) vs. a loss in FY17 on a recovery in swine prices and
- steady growth (+7.3% y-o-y) in its dairy segment (US$71.8m), which mitigated the losses still seen in its consumer segment (loss of US$16.6m).
- Coupled with lower forex costs, core net profit of US$104.3m (excluding other gains, some forex and bio asset revaluation) was up > 200% y-o-y.
Poultry grows on DOC supply crunch
- PT Japfa TBK’s EBIT grew 63.9% y-o-y, largely due to higher average selling prices (ASP) for day-old chicks (DOC) and broilers given the lack of DOC supply post the implementation of the ban on the use of antibiotics in poultry feed in Jan 18.
- FY18 EBIT margin rose to 10.9% (vs. FY17: 7.3%) with a spike in DOC margins to 22.6% (vs. 12.0% in FY17) and live bird margins to 7.3% (vs. 2.5% in FY17).
APO: when Vietnam swine flies
- The Animal Protein Other (APO) division reported FY18 EBIT of US$33.1m (vs. FY17 loss of US$26.9m), driven by operating profit of US$30.9m in Vietnam with swine prices having recovered in the year.
- According to Charoen Pokphand Foods, Vietnam swine prices averaged at VND42.9k/kg in 11M18 (up 51% vs. FY17: VND28.6k/kg).
- Overall, the APO segment turned in EBIT margin of 5.7%, with Vietnam recording an 8.0% EBIT margin (vs. -11.5% in FY17).
Maintain ADD, analyst briefing held later today
- We expect key questions to be centred on
- sustainability of Indonesian DOC and live-bird prices and thus margins;
- outlook for Vietnam swine market given that there have been initial cases of African swine flu in parts of Vietnam and
- outlook for Japfa’s consumer division which is still turning losses.
- Maintain SOP-based Target Price of S$0.90.
- Catalysts are higher-than-expected margins across all segments; risks are vice versa.
Cezzane SEE
CGS-CIMB Research
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https://research.itradecimb.com/
2019-03-01
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