Contact our analyst Eka
Buy, 24% upside
29 January 2024
Price Rp 4550
Target price Rp 5600
Investment Consideration
Anticipating lower 4Q2023 performance
- CPIN maintained a positive sales growth of +10% YoY to IDR 16.2 trillion in 3Q2023 due to increased sales from the Feed and Day-old Chick businesses. For 9M2023, CPIN also sustained positive sales growth of +15.5% YoY to IDR 47.1 trillion.
- Despite flat broiler average prices QoQ at IDR 21,050 in 3Q2023, which is +12.2% YoY, the Broiler business segment experienced a sales decline of -1% YoY or -13% QoQ to IDR 7.82 trillion in 3Q2023. The Broiler business segment recorded a negative EBIT margin at -0.6%.
- Processed chicken sales maintained double-digit growth of +30% YoY to IDR 2.79 trillion with a higher EBIT margin of 15.4%. Feed also recorded +13% YoY growth to IDR 4.5 trillion with a higher EBIT margin of 8.2% compared to 3Q2022 at 3.6%.
- DOC sales increased +83% YoY to IDR 684 billion due to DOC prices reaching their highest level in 3Q2023 of IDR 6,886 on average. This resulted in an improvement in the EBIT margin QoQ to 11.4%.
- We anticipate lower performance in 4Q2023 as corn prices have risen to IDR 9,000/kg while soybean meal remains low. Livebird and DOC prices also declined, with livebird at IDR 17,465 in December, the lowest since February 2023, while the DOC price reached IDR 1,754, the lowest since April 2020.
3Q2023: Quarterly improvement continues
- CPIN’s bottom-line profit continued to improve in 3Q2023, with growth of +69% YoY or +14% QoQ to IDR 1.29 trillion. NPM also improved from 5.2% in 3Q2022 to 8.0% in 3Q2023.
- The cost of sales also increased +5.3% YoY but decreased slightly -1.6% QoQ. While gross profit still recorded +37.1% YoY growth to IDR 2.78 trillion with a higher GPM of 17.2% in 3Q2023.
- CPIN recorded an operating profit of IDR 1.78 trillion, +77% YoY growth, with an improved OPM of 11%.
- For 2023F, while margins have improved in 3Q2023, we expect more margin pressure in 4Q2023. For 2024F, we anticipate demand growth and higher livebird and DOC prices in 1Q2024 ahead of the Fasting month and Eid.
Valuation: Maintain BUY
- We are targeting CPIN to trade at a 22x 2025F PE within a year. The Target Price is IDR 5,600, representing a 24% upside. We recommend BUY.