CPIN - Good performance to continue throughout '24F

KBVS Update
Wednesday, 03 July 2024

CPIN - Good performance to continue throughout '24F
(Re-initiate BUY, with TP IDR6,075)

Government' National Food Agency (NFA), has introduced and exercised its latest regulation (NFA regulation No.6/2024) on local corn' (LC), chicken egg' and livebirds' (LB) reference prices, which replaced the NFA regulation No.5/2022. Note that, the reference prices has helped to stabilize the LC', LB' and eggs' average selling price (ASP) in the market, which also helps the corn farmers and small chicken breeders.

CPIN could continue its good performance further in ‘24F and expects CPIN’ revenue from its DOC, LB, feed and PC' segment could grow by 11% yoy, 4% yoy, 11.1% yoy, and 19.8% yoy. As a result, we expect CPIN’ revenue could reach IDR65.3 tn (+6% yoy) in ‘24F on higher demand with better DOC and LB' ASP. While for 1H24, CPIN’ revenue could reach around 50% of its total revenue in ‘24F.  

The LC’ and SBM’ ASP has declined to around IDR4,900 /kg (vs around IDR6,000/kg in 2023) and USD350/tons (or below than its trailing 12months’ ASP of USD409/tons), in June’24. Thus, we expect CPIN’ gross profit and EBIT to grow by 15.8% yoy and 23.1% yoy, with gross and EBIT margin to expand by 130bps yoy and 100bps yoy,in ‘24F on lower LC’ and SBM’ prices. All in all, we expect CPIN’ net profit to grow by 35.9% yoy with around 100bps yoy net margin expansion in ‘24F.        

CPIN' revenue grew by 9.3% yoy/9.8% qoq in 1Q24 on higher demand with better DOC and LB’ ASP. CPIN’ 1Q24 gross profit and EBIT grew by 44.5% yoy/ 56.3% qoq and 116.1% yoy/687.4% qoq, with gross and EBIT' margin expanded by 330bps yoy/400bps qoq and 330bps yoy/570bps qoq, respectively on lower LC' and SBM’ prices with better cost management. All in all, CPIN' 1Q24 earnings grew +195% yoy/299.2% qoq, with a 280bps yoy/700bps qoq net margin expansion, which came at 22.6% and 22% of our ‘24F and consensus’.

Re-initiate our coverage on CPIN with a Buy and TP of IDR 6,075/share, which implies 31.6x ‘24F PE or at +0.5 stdv of its 5 years mean PE. We think CPIN will surely benefit from this year' recovery in the poultry sector, on better raw material prices (LC and SBM), DOC and LB’ prices with higher demand yoy. Currently, CPIN is trading at 26.4x ‘24F PE or below its 5 years’ mean PE.

Best regards,
Andre Suntono   KBVS Research team