Japfa Comfeed Indonesia (JPFA IJ)

3Q24 results: Beating expectations on lower-than-anticipated decline in margin

 

  • Despite delivering lower 3Q24 net profit of Rp617bn (-24% qoq, -28% yoy), JPFA’s 9M24 came in above our/cons. est. (94%/ 95% of FY24F). 
  • Margin declined as expected, but 3Q24’s gross OPM of 6.2% came in ahead of our 5.6% bullish estimates.
  • We raised our FY24-25F net profit est. by 31-26%, rolled forward our valuation to FY25F, and lifted our TP to Rp2,900; maintain BUY rating. 

 

Beating our 3Q24 estimates on lower-than-anticipated decline in margin

JPFA reported 3Q24 net profit of Rp617bn (-24% qoq, -28% yoy), with gross revenue slightly declining to Rp21tr (-1% qoq, -4% yoy), and OPM declining to 6.2% (2Q24/3Q23: 8.6/7.1%). Despite the revenue and OPM drops, JPFA’s 3Q24 OPM still came in ahead our bullish forecast of 5.6% OPM for 3Q24. Despite the expected lower feed costs, feed OPM declined 69bps qoq to 7.9% in 3Q24, reflecting the lower ASP, in our view. DOC margin dropped only 13bps (relatively stable at c. 20%), while livebird’s margin was practically BEP (at -0.2%) in 3Q24, both of which contributed to strong 3Q24 performance.

 

Expecting FY24F upgrades as ST key catalyst

JPFA’s 9M24 net profit reached Rp2.1tr (+124% yoy), forming 94% and 95% of our and consensus’ FY24F respectively, while net revenues were in line. The robust yoy growth was driven by OPM, which rose to 7.2% (from 4.5% in 9M23) and higher gross revenues (+7% yoy). Moreover, interest expenses dropped by 11% yoy in 9M24 as the company continued to reduce its net gearing, which stood at 65% in 3Q24, down from 84% in 3Q23.

 

FY24F/FY25F net profit estimates raised by 31%/26%

We anticipate an improving margin for 4Q24 (vs. 3Q24), driven by higher DOC and livebird outpacing the higher feed costs, and thus expect the company to deliver an all-time-high net profit in FY24. We raised our FY24/25F net profit estimate as we lowered our FY24F SBM costs assumption from US$395/t to US$343/t (YTD price at US$344, latest price at US$305 as of Oct 28th, 2024).

 

Maintain Buy rating with a higher TP of Rp2,900

We lifted our TP to Rp2,900 (from Rp2,200) to reflect our higher FY25F est. and roll forward our valuation to FY25F. We maintain our Buy rating due to JPFA’s attractive valuation at 6.5x FY25F PE. Our TP is based on a target EV/EBITDA multiple of 6.6x (5-year average), implying FY24/25F PE multiple of 11.7x/11.3x. Risks to our view include potential lower-than-expected LB prices and increases in feed costs.

 

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