Company Update

23 September 2022

JPFA IJ - MNC Sekuritas Equity Report September 23, 2022

Slowly But Surely
Key Takeaways
• Broiler prices bounced to IDR18,000-19,000 levels in 16-Sep’22, rising ~4% from the last month figure.
• In Jul-22, DOC prices is stabilizing to IDR5,000-5,500, recovering from lowest level of IDR2,500-IDR4,000 due to oversupply, in May-Jun’22.
• Seasonally, the Broiler and DOC prices are likely to increase and remains solid in 4Q, largerly by the festive season which lift the demand (exhibit 01).
• We expect the average domestic corn prices in FY22E to fall to ~IDR4,500/Kg (vs ~IDR5,500/Kg in FY21) as we estimated that corn yield in Sep-22 (which accounting for 30% to total domestic yield) to increase, mainly by more manageable rainfall.
• On the other hand, USDA reported the Soybean yield in US and Brazil (contributed to global export by ~87%) could rose +6% YoY in FY22E, driven by good crop conditions and secure sufficient fertilizer supplies.
• Our elasticity model using FY14-15 figures as the inflation pace at +8% YoY, shows that chicken meat is less elastic compared to the beef price, with the coefficient of 0.84/-1.21, respectively (exhibit 04).
• We recommend BUY JPFA with target price of IDR2,050/share. JPFA is currently trading at an attractive valuation of 10.98x PE level (close to 3 years avg. mean).
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