Tuesday, September 25, 2012

Japfa Comfeed Indonesia

Bahana : JPFA

25 September 2012  Bahana Beacon – Result Flash

2Q12 performance:  Way above ours and consensus

§        Strong 2Q12 earnings, +113.3% q-q and +558.4% y-y: JPFA posted significant jump in 2Q12 bottom line to IDR395b, significantly above our and consensus’ estimates, up 113% q-q and 558% y-y, bringing 1H12 net profit to reach IDR581, up 80% y-y, accounting for 67% of our full-year estimate and 94% of consensus’ expectation.  

§        No surprise in terms of top line: JPFA posted revenues of IDR4.4t, up 10% q-q and 10% y-y, in line with our and consensus’ estimates,.

§        Huge margin improvements across the board: At the operating level, JPFA booked operating margin expansion to 12.6%, up from 4.2% in 2Q11 and 9.0% in 1Q12, on the back of commercial farm’s higher margins and lower marketing costs.  This brought operating profit to IDR561b (45% above our full-year estimate), up 55.1% q-q and 231% y-y.

Outlook: Earnings upgrades in the offing

Moving forward, we expect contribution from DOC and commercial farm to remain strong as average chicken price ytd has risen to IDR17,483, up 14% y-y (2011 ASP: IDR15,395), while average DOC price ytd of IDR4,378 has jumped 37% y-y (2011 ASP: IDR3,226). We also see stronger 3Q12 earnings on strong chicken consumption during the Lebaran festivities (usually highest sales during the year). Hence, we will be revising up our earnings projections.

Recommendation & valuation: BUY on low PE and high growth

Given this higher-than-expected result release, just 7% market outperformance ytd (exhibit 4) and our expectations that the subsequent quarters will continue to provide strong earnings, JPFA remains firmly on our BUY list.  Even based on our unrevised earnings, the stock is still trading on undemanding single digit PE with significantly above-market growth.

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