Japfa - UOB Kay Hian 2022-05-06: 1Q22 Results In Line; Weakness From Vietnam & High Feed Costs

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JAPFA LTD. (SGX:UD2)

Japfa - 1Q22 Results In Line; Weakness From Vietnam & High Feed Costs

• Japfa (SGX:UD2)’s 1Q22 core PATMI of US$24.6m (-64% y-o-y) was in line with our expectations, forming 24% of our full-year forecast.
• Performance from the Indonesia poultry segment improved q-o-q as the lockdown eased while Vietnam operations continued to experience weakness from low swine ASPs and high feed costs. Its China dairy segment continued to deliver a stable performance but recorded lower earnings due to listing expenses of AustAsia amounting to US$7m.

Japfa's 1Q22 Results in line with expectations.

• Japfa’s 1Q22 core PATMI of US$24.6m (-64% y-o-y) was within our expectations, forming 24% of our full-year forecast. Revenue rose 12% y-o-y to US$1.2b, driven by higher sales volumes across all segments.
• The core PATMI weakened as major global external factors have worsened. The impact of high global raw material prices, inflationary pressures, ASF and COVID-19 weighed down profitability.

Recovery for Japfa TBK but weak performance in APO continues.

• Japfa TBK reported core PATMI of US$22.4m (-30% y-o-y/+24% q-o-q), as it continues to show q-o-q recovery since 4Q21, due to better ability to pass on raw material cost increases in its feed selling prices. However, losses from the Animal Protein Other (APO) segment continued in 1Q22 at US$11.2m vs US$20.8m at 4Q21.
• Margins remained under pressure due to higher global raw material and shipping costs, resulting in higher production costs for both poultry and swine. African Swine Fever (ASF) resurgence in 4Q21 resulted in an increase in operational costs, while swine fattening prices declined due to pre-emptive sales on the market.

China dairy delivered stable performance but earnings declined on listing expenses.

• China’s dairy proposed listing of AustAsia amounting to US$7m.

Indonesia poultry and Vietnam swine segments to face uncertainties from volatile ASPs and higher costs of raw materials.

• In Indonesia, prices of broiler and day-old-chick (DOC) remain volatile. Similarly, in Vietnam, swine prices in 2022 and 2021 were lower compared to 2020 when the prices were exceptionally high due to supply shortage caused by ASF. In addition, disruptions in global logistics translated into higher costs of raw materials.

Japfa - Earnings forecast & recommendation

• We maintain our financial catalysts:
  • Better-than-expected ASPs for Indonesia poultry, China dairy and Vietnam swine products.
  • Successful value-unlocking activities such as spinning off the dairy or APO segment(s).
  • Strengthening of currencies in Indonesia, Vietnam and China.
• See
  • Japfa's Share Price,
  • Japfa's Target Price,
  • Japfa's Analyst Reports,
  • Japfa's Dividend History,
  • Japfa's Announcements,
  • Japfa's Latest News.

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-05-06

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