Another Obstacle to Overcome
Key Takeaways:
▪️ JPFA's net profit turned a corner in 2Q23, posting a profit of IDR331.9bn (vs net loss IDR249.9bn in 1Q23), making its 1H23’s net profit to be IDR82.0bn. Overall, JPFA in 2Q23 recorded better profitability performance with a GPM/NPM at 16.7%/2.7% (vs 10.9%/-2.1% in 1Q23).
▪️ Our analysis indicates a potential oversupply of DOC FS in the range of 304mn - 430 mn for the entire FY23E, indicating the need for further culling of around 5mn - 131mn throughout this year. However, given the uncertain policy outlook, broiler and DOC prices remain vulnerable.
▪️ The loss in 1Q23 amounting to IDR249.9bn resulted in EPS TTM of IDR33.3/share with a PE TTM of 38.9x for now, which is the highest level in 11 consecutive quarters. As a tactical move, we are concerned that further price corrections may occur in the short term.
▪️ We recommend HOLD for JPFA at a lower TP of IDR 1,200, implying PE/PBV of 9.6x/1.0x in FY23E. We trimmed our FY23E figures due to disappointing results in 1H23, and we will closely monitor the developments in broiler and DOC prices during 3Q23 to reassess our projection.
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