1Q22: Results In Line; Weakness From Vietnam And High Feed Costs
Japfa’s 1Q22 core PATMI of US$24.6m (-64% yoy) was in line with our expectations,
forming 24% of our full-year forecast. Performance from the Indonesia poultry segment
improved qoq as the lockdown eased while Vietnam operations continued to experience
weakness from low swine ASPs and high feed costs. Its China dairy segment continued
to deliver a stable performance but recorded lower earnings due to listing expenses of
AustAsia amounting to US$7m. Maintain HOLD and SOTP-based target price of S$0.63.
RESULTS
• Results in line with expectations. Japfa’s 1Q22 core PATMI of US$24.6m (-64% yoy) was
within our expectations, forming 24% of our full-year forecast. Revenue rose 12% yoy to
US$1.2b, driven by higher sales volumes across all segments. The core PATMI weakened as
major global external factors have worsened. The impact of high global raw material prices,
inflationary pressures, ASF and COVID-19 weighed down profitability.
• Recovery for Japfa TBK but weak performance in APO continues. Japfa TBK reported
core PATMI of US$22.4m (-30% yoy/+24% qoq), as it continues to show qoq recovery since
4Q21, due to better ability to pass on raw material cost increases in its feed selling prices.
However, losses from the Animal Protein Other (APO) segment continued in 1Q22 at
US$11.2m vs US$20.8m at 4Q21. Margins remained under pressure due to higher global raw
material and shipping costs, resulting in higher production costs for both poultry and swine.
African Swine Fever (ASF) resurgence in 4Q21 resulted in an increase in operational costs,
while swine fattening prices declined due to pre-emptive sales on the market.
• China dairy delivered stable performance but earnings declined on listing expenses.
China’s dairy revenue rose 18% yoy, driven by strong raw milk prices due to supply shortage
in the market, as well as higher raw milk sales volumes, with the additional contribution from
Farm 8 and the two recently acquired farms in Shandong. However, core PATMI for the dairy
segment fell 44% yoy to US$12.1m due to expenses related to the proposed listing of
AustAsia amounting to US$7m.
STOCK IMPACT
• Indonesia poultry and Vietnam swine segments to face uncertainties from volatile
ASPs and higher costs of raw materials. In Indonesia, prices of broiler and day-old-chick
(DOC) remain volatile. Similarly, in Vietnam, swine prices in 2022 and 2021 were lower
compared to 2020 when the prices were exceptionally high due to supply shortage caused by
ASF. In addition, disruptions in global logistics translated into higher costs of raw materials.
EARNINGS REVISION/RISK
• We maintain our financial forecasts.
VALUATION/RECOMMENDATION
• Maintain HOLD and SOTP-based target price of S$0.63, which implies 9.1x 2022F.
Suggested entry price: S$0.56.
SHARE PRICE CATALYST
• Better-than-expected ASPs for Indonesia poultry, China dairy and Vietnam swine products.
• Successful value-unlocking activities such as spinning off the dairy or APO segment(s).
• Strengthening of currencies in Indonesia, Vietnam and China