Japfa - Adjusting To Ongoing Headwinds
- Japfa (SGX:UD2) posted a core net profit of US$55.2m in 1H22 excluding one-off expenses of US$9m related to the listing of its China dairy business, AustAsia Investment holdings (AIH). This is slightly ahead at 57%/55% of ours and consensus’ FY22F estimates.
- For 2Q22, revenue momentum was intact, growing 0.5% and 8.0% q-o-q and y-o-y respectively, but EBIT declined by 26% y-o-y due to a lower EBIT margin of 7.2% from a high base of 10.4% a year ago. The margin compression of 3.3% points was also a result of higher feed costs during the quarter.
- The turnaround of Animal Protein – Others (APO) from an operating loss of US$8.6m in 1Q22 to an operating gain of US$2.5m contributed to an EBIT growth of 10.1% and a 0.6% pt margin expansion q-o-q. Operating losses of APO in 1Q22 was a result of the resurgence of African Swine Fever (ASF), which led to unfavourable swine prices in the midst of a pre-emptive sales environment.
- High feed costs also affected the Indonesia poultry and China dairy business, but buoyant ASPs provided buffers for poultry in Indonesia and raw milk in China.
- We reiterate our ADD call for Japfa with an unchanged SOP-based target price of S$0.81, contingent on the value realisation behind the listing of AustAsia Investment holdings (AIH). Management has guided that one-off costs in relation to the listing had mostly been expensed in 1H22.
- Japfa's management also shared that the poultry export business to Singapore has yet to start, but contribution is not likely to be significant given the small market sizing.
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 2022-07-29 2022-07-29
Previous report by CGS-CIMB:
2022-06-22 Japfa's 2Q22F Preview - Likely A Slight Improvement
Japfa Analyst Report,
Japfa Target Price,
Japfa Share Price History,
Japfa Dividends/ Corp Actions,
Japfa News Articles