JPFA - To grow further in ‘25F, after a great recovery year in ‘24F

KBVS Update 
Monday, 25 November 2024

JPFA - Further growth in '25F, after this year' recovery
(Re-initiate BUY; TP: IDR2,300)

Next year, we expect the demand growth for chicken to be higher yoy on government’ free nutritious lunch program that will start on Jan 2nd,2025. We also expect a stable ASP and supply of LB and DOC to continue in ‘25F due to this year’ voluntarily culling from poultry players (JPFA, CPIN, etc) and a reduced grand-parent (GP) stock import quota by government. Thus, we expect JPFA’ revenue to grow by 7% yoy and 10.3% yoy, respectively in '24F and ‘25F.  

JPFA’ gross margin could reach 19.3% and 19.4%, respectively in ‘24F and ‘25F due to low and stable raw material prices as the government also needs to protect local corn farmer. JPFA could also continue to have better cost management. Thus, its EBIT margin to expand by 9.2% and 9.3%, respectively in ‘24F and ‘25F.

JPFA’ earnings could reach IDR2.77 tn (+197.9% yoy) and IDR3.18 tn (+15% yoy), respectively in ‘24F and ‘25F due to higher sales with stable LB’ and DOC’ ASP, amidst lower raw material prices and better cost management. All in all, we expect JPFA’ net margin to reach 5.1% and 5.3% respectively in ‘24F and ‘25.

JPFA' earnings reached IDR2.09 tn (+123.6% yoy) in 9M24 on higher LB’ and DOC’ ASP this year with lower raw material prices. While, JPFA’ revenue reached IDR41.3 tn (+9.3% yoy) in 9M24, despite a flattish revenue growth (+0.1% yoy/-0.7% qoq) in 3Q24 as lesser festive events in the quarter. All in all, JPFA’ gross, EBIT and net margin still expanded by 350bps yoy, 380bps yoy and 260bps yoy, respectively in 9M24.  

This year, poultry sector has recovered from low ASP of LB and DOC and high raw material prices. In ‘25F, we expect JPFA to benefit from higher demand for chicken on government’ free nutritious lunch program, with a stable ASP and supply of LB and DOC. Thus, we re-initiate our coverage on JPFA with a Buy and TP of IDR 2,300/share, which implies 8.5x ‘25F P/E or at -0.5 stdv of its 5 years mean P/E. Currently, JPFA is trading at 6.5x ‘25F P/E or at -1stdev of its 5 years’ mean P/E.

Regards,
Andre Suntono – KBVS Research Team