Japfa's 2Q22F Preview - Likely A Slight Improvement
- We believe that in tandem with the more extensive economic reopening in Indonesia and Vietnam, Japfa (SGX:UD2)’s key operating regions for animal proteins, consumption patterns have improved in the second quarter, especially given the stable broiler prices in Indonesia, and swine prices in Vietnam after an early Lebaran and Tet, respectively. However, some weakness is observed for prices of day-old chicks (DOCs) coming off the Lebaran festivities in Indonesia which could affect broiler prices in 3Q22F.
- In China, prices of raw milk have gradually trended downwards, but consumption is likely to remain resilient despite lockdowns in cities such as Shanghai and Beijing as dairy product is considered a consumer staple, in our view. We also think that the stabilising prices for its raw feed materials, such as soybean meal and corn, also suggests better cost pass-through that would help alleviate some of the pressure on its profitability over the past three quarters.
- We maintain our ADD call on Japfa with an unchanged SOP-based target price of S$0.81. We believe there is an underlying recovery in consumption patterns that will be supported by stabilising prices.
- The Malaysian poultry export ban that went in force on 1 Jun would reduce imports into Singapore by up to 3.6m chicken per month. Singapore has since entered talks with the Indonesian authorities to explore options to import chicken from Indonesia. A Reuters article cited that Indonesia has a weekly production of 55m-60m chicken with a 10-20% production surplus, and an agreement between Singapore and Indonesia could be a win-win situation for both countries. A local Mandarin newspaper in Singapore cited Japfa’s CEO Mr Tan Yong Nang as saying that he had have talks with Singapore authorities in the past for Japfa to export chicken to Singapore without success, but Malaysia’s current poultry export ban could hopefully help push discussions through.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
TAY Wee Kuang CGS-CIMB Research | https://www.cgs-cimb.com 2022-06-22 2022-06-22
Read also CGS-CIMB's most recent report:
2022-11-02 Japfa - No Reprieve From Margin Compression
Check out the most recent target prices at Japfa Target Prices. Listing of analyst research reports at Japfa Analyst Report.
Japfa Share Price History,
Japfa Dividends & Corp Actions,
Japfa News Articles