Onto the Fast Track
Solid 1H18 Results Driven by Strong Growth of Animal Feed Division
JPFA showing satisfactory performance, with revenue in 1H18 increasing by 18.20% YoY to
IDR16.70 tn, representing 49.30%/48.58% of the consensus/MNCS estimate for FY18E. The
revenue increase was a result of increasing poultry and aquaculture feed sales volume by
8% and 15% respectively in 2Q18. In 1Q18, there was substantial growth in sales volumes
across the poultry division; in particular, sales volume for feed increased 14.5%. JPFA also
successfully managed an operational excellency and cost efficiency, holding their
operating margin at a level 12.56%. Meanwhile, net profit attributable to owners of the
parent increased significantly by 146.23% YoY to IDR1.10 tn indicates a triple-digit growth
rate, with net profit margins at 7.02%, reflecting 54.12%/46.04% of the consensus/MNCS
estimate.
Key Growth Catalysts in FY18E-1H19F
We believe that the positive profitability trend in 1H18 will continue throughout the year.
It is supported by: 1) Passing on soybean meal and corn prices, despite volatility due to
demand and supply; 2) Potential Grand Parent Stock (GPS) import quota increased along
with Indonesia’s growing economy and increasing public consumption. We expect sales
volume will increase by 12%-15% YoY for FY18E/FY19F; 3) Government policy that
increased reference prices of chicken (lower limit and upper limit) by Rp1,000/kg to
Rp18,000/kg and Rp20,000/kg; 4) Increase in market share following improvement in
poultry’s operational efficiencies.
Valuation and Recommendation: Maintain BUY at TP IDR2,850
We recommend a BUY for JPFA at a TP of IDR2,850, reflecting a PE/PBV of
13.51x/2.95x for FY18E and 12.45x/2.65x for FY19F. We see JPFA continuing to grow in
the future, backed by: 1) Massive distribution channels from developing slaughterhouses;
2) Rise in GDP and chicken consumption; 3) Economic of scale. Being number 2 market
share with many branches across the regions, JPFA has more facilities and access to obtain
and store raw materials; 4) Consistencies in capex spending across poultry’s operations.
We expect revenues to increase by 16.15%/13.26% for FY18E/FY19F, totaling IDR34.38 tn/
IDR38.94 tn, with net income of IDR2.40 tn/IDR2.61 tn. The restriction on AGP did not
affect JPFA’s production rates as the Company has good biosecurity and traceability. In
contrast, independent farmers can be less productive due to bad biosecurity, poor feed
quality and traditional farms management- all result in higher mortality rate and lack
uniformity of chicken.
