Indonesian Poultry Producers in Focus: Japfa Comfeed Indonesia
Japfa Comfeed Indonesia, one of the largest and most integrated agri-food companies in Indonesia, is expected to see rising profit in 2016 and 2017 supported by stable prices of raw materials and rising poultry demand. Its corporate earnings in the first nine months of 2016 were impressive. Together, it led to an upgrade in the outlook for the company's future earnings. Meanwhile, S&P Global Ratings also recently raised its long-term corporate credit rating for Japfa Comfeed Indonesia from B to B+.
The company, a unit of Singapore-based pan-Asian agro-food firm Japfa, is focused on animal feed manufacturing, chicken breeding, poultry processing and aquaculture farming.
Securities company Ciptadana Securities raised its forecast for net profit of Japfa Comfeed Indonesia by 51 percent to IDR 2.3 trillion in 2016 and by 37 percent to IDR 2.8 trillion in 2017. Meanwhile, the firm's net margin was revised from 4 percent to 7 percent in 2016 and from 5 percent to 7 percent in 2017.
In the first three quarters of 2016 the company's corporate earnings exceeded analyst expectations by a big margin. Japfa Comfeed Indonesia's revenue rose to IDR 20.6 trillion, while net profit was recorded at IDR 1.72 trillion. Meanwhile, in the fourth quarter the company's earnings should rise further as Christmas and New Year celebrations boost demand.
An advantage is that the price of corn (a key basic material for the company's production process) has been made stable after Japfa Comfeed Indonesia made a long-term agreement with local corn suppliers for a fixed IDR 3,150 per kilogram. This is a good deal that prevents foreign exchange losses due to rupiah depreciation. Previously the company imported most of its corn. However, as the Indonesian government is eager to develop the domestic corn sector, the company can now limit corn imports. Lastly, rising prices in the day-old chick (DOC) and broiler chicken segments, helps drive the company's profitability.
Secondly, Indonesia's macroeconomic environment is better compared to one year ago with GDP growth accelerating, low inflation, an under control current account deficit and stable rupiah (although the Trump victory has caused significant pressures on emerging market assets). Meanwhile, commodity prices are expected to rise in the foreseeable future and this would boost discretionary spending.
Ciptadana Securities advises investors to purchase shares of Japfa Comfeed Indonesia and raised the target price to IDR 2,500 a piece (reflecting a price-to-earnings ratio of 9.3 times). On Thursday (17/11) shares of the company slid 1.62 percent to IDR 1,820 a piece. However, its shares surged a whopping 186.61 percent so far this year.
Stock Quote Japfa Comfeed Indonesia - JPFA:
In April 2013 the company conducted a 1:5 stock split
Future Projection Japfa Comfeed Indonesia's Financial Highlights:
| 2014 | 2015 | 2016F | 2017F | 2018F | |
| Net Sales | 24,459 | 25,023 | 34,998 | 41,415 | 35,300 |
| Operating Income |
1,276 | 1,728 | 3,960 | 4,840 | 4,807 |
| Net Income |
332 | 468 | 2,290 | 2,848 | 2,795 |
| P/E Ratio (x) | 32.9 | 23.3 | 8.4 | 6.7 | 6.9 |
| P/BV (x) | 2.2 | 1.9 | 2.6 | 2.0 | 1.6 |
in billion IDR rupiah unless otherwise stated
Source: Ciptadana Securities (17/11/2016)