Japfa - UOB Kay Hian 2021-08-02: 2Q21 Results In Line; Expect Uncertainties From Indonesia & Vietnam

JAPFA LTD. (SGX:UD2) | SGinvestors.io JAPFA LTD. (SGX:UD2)

Japfa - 2Q21 Results In Line; Expect Uncertainties From Indonesia & Vietnam

  • Japfa’s 2Q21 core net profit (grew 25% y-o-y but fell 27% q-o-q) was in line with 1H21 forming 54% of our full-year estimates.
  • We expect more uncertainties in 2H21 for two out of three key segments of Japfa, namely Indonesia poultry and Vietnam swine, due to the worsening COVID-19 situation which could impact ASPs. However, China’s dairy business should remain stable.
  • We cut our Japfa's 2021F and 2022F earnings per share forecast by 16% and 14% and reduce our SOTP-based target price by 34% to S$0.77. Downgrade Japfa to HOLD.


Japfa's 2Q21 earnings In line with expectations.

  • Japfa (SGX:UD2)’s 2Q21 core net profit of US$49.4m (+25% y-o-y /-27% q-o-q) was in line with our estimates, with 1H21 core net profit forming 54% of our full-year raw milk. We expect the China dairy segment to continue to perform well as the raw milk shortage may last for another 2-3 years as more independent fairy farmers give up cow-raising.


STOCK IMPACT

  • Indonesia poultry and Vietnam swine segments to face uncertainties due to COVID-19. In Indonesia, the COVID-19 situation worsened in Jun/Jul 2021, and this is likely to impact in China suffered minimal impact from the COVID-19 situation.


EARNINGS REVISION/RISK

  • We reduced our core PATMI forecast for Japfa in 2021/2022/2023 by 16%/14%/13% after incorporating weaker ASPs for the Indonesia poultry and Vietnam swine segments.


VALUATION/RECOMMENDATION



SHARE PRICE CATALYST

  • Better-than-expected ASPs for Indonesia poultry, China dairy and Vietnam swine products.
  • Value-unlocking activity such as spinning off the dairy or APO segment.
  • Reversal of rupiah weakness.





John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-08-02
SGX Stock Analyst Report HOLD DOWNGRADE BUY 0.77 DOWN 1.170



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