Buy (15E TP Bt21.00) Company Update
GFPT Buy (15E TP Bt21.00)
Company Update
Close Bt14.80
Agribusiness January 24, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
2014 earnings in line; 2015‐16 earnings cut by 14%
FY15
FY16
Consensus EPS (Bt)
1.693
1.817
KT ZMICO vs. consensus Share data
‐16.1%
‐14.1%
Reuters / Bloomberg
GFPT.BK/GFPT TB
Paid‐up Shares (m)
1,253.82
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
19.00/570.00
Foreign limit / actual (%)
49.00/17.12
52 week High / Low (Bt)
21.40/12.60
Avg. daily T/O (shares 000) NVDR (%)
3,646.00 5.67
Estimated free float (%)
44
Beta
0.80
URL
www.gfpt.co.th
CGR
Weak broiler price and low season pressure share price Despite our decision to cut the 2015‐16E earnings projections and the target price to Bt21/share (PBV/ROE 0.14x), we still like GFPT for its superior profitability with expected ROE of 19% and strong earnings quality with NI/EBITDA of 73% in 2015. Thus, we believe the stock remains attractive. The short‐term pressure on the share price given the weak broiler prices and low season should present a good opportunity to accumulate the stock. Maintain “Buy”. 4Q14 earnings dropped 23%YoY and 27%QoQ GFPT posted a 4Q14 net profit of Bt368mn (‐23%YoY,‐27%QoQ), in line with both our forecast of Bt381mn and the market estimate of Bt375mn, respectively. The earnings decline was blamed on lower export volume to 6,100 tons (‐5%YoY,‐13%QoQ) due to the low export season. The margin remained sound QoQ owing to higher export prices and a weaker baht. During 4Q14, the domestic broiler price decreased and the profit contribution from affiliates amounted to Bt53mn (+5%YoY, ‐52%QoQ). 2014 net profit grew by 17%YoY GFPT’s 2014 net profit amounted to Bt1.78bn, up 17%YoY. The firm booked FX gain at Bt23mn and core profit of Bt1.76bn, growing by 23%YoY on the back of better sales and profit margin. Furthermore, the profit contribution from its affiliates rose by 47% YoY to Bt326mn. 2015‐16E earnings projections were cut by 14% We revised down our 2015‐16E earnings projections by 13.9% and 14.3% to Bt1.78bn and Bt1.96bn, respectively, to take into account the downward revisions to: i) sales estimates by 5‐6% and ii) gross profit margin assumptions by 13.75% for 2015‐16. The downward revisions reflect the likelihood of lower‐than‐expected export volume amid the economic slowdown and the current decreases in domestic broiler prices. Financial and Valuation FY Ended 31 Dec
2012
2013
2014
2015E
2016E
Revenues (Btmn)
15,370
16,692
17,829
19,654
21,611
Net profit (Btmn)
232
1,516
1,780
1,775
1,957
EPS (Bt)
0.18
1.21
1.42
1.42
1.56
Norm. EPS (Bt)
0.18
1.14
1.40
1.42
1.56
‐81%
555%
17%
0%
10%
Norm. EPS growth (%) Dividend (Bt)
‐
0.35
0.40
0.40
0.44
BV (Bt)
4.68
5.81
6.89
7.90
9.02
2012
2013
2014
2015E
2016E
80.14
12.24
10.43
10.45
9.48
FY Ended 31 Dec
Phornsri Laysanitsaerekul Analyst , no 17621 [email protected] 66 (0) 2624‐6258
PER (x) EV/EBITDA (x)
27.26
10.82
9.36
8.70
7.60
PBV (x)
3.16
2.55
2.15
1.87
1.64
Dividend yield (%)
0.0%
2.4%
2.7%
2.7%
3.0%
ROE (%) Net gearing (%)
3.9% 94%
23.0% 53%
22.4% 38%
19.2% 27%
18.5% 14%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2014 net profit grew by 17%YoY given a wider margin and larger profit contribution from affiliates GFPT’s 2014 net profit amounted to Bt1.78bn, up 17%YoY. The firm booked a FX gain of Bt23mn and core profit of Bt1.76bn, growing by 23%YoY as sales increased by 7% and the gross profit margin widened to 14% (vs. 13.4% in 2013). Another earnings driver was the 47% YoY increase in the profit contribution from its affiliates to Bt326mn. GFPT announced a dividend per share at Bt0.40/share, implying a dividend payout of 28%. The firm will go XD on 6 Mar‐15 and the dividend payment will be made on 30 Apr‐15. The current share price implies a dividend yield of 2.6%. Figure 1: 4Q14 & 2014 earnings review YE Dec (Bt m) Sales COGS Gross profit SG&A expense Others income EBIT Interest expense EBT Tax expense Equity income MI Norm. profit Extra. Items Net profit
4Q13 4,406 ‐3,700 706 ‐313 66 459 ‐43 415 11 51 4 473 4 477
3Q14 4,816 ‐4,171 645 ‐284 60 421 ‐36 385 8 110 5 499 7 506
4Q14 4,496 ‐3,886 610 ‐336 58 332 ‐33 300 8 53 6 355 13 368
% YoY 2.0% 5.0% ‐13.5% 7.5% ‐11.1% ‐27.5% ‐25.1% ‐27.8% nm 4.8% 35.7% ‐24.9% 204.3% ‐22.8%
%QoQ ‐6.6% ‐6.8% ‐5.3% 18.5% ‐3.3% ‐21.1% ‐9.0% ‐22.2% 1.5% ‐51.9% 17.3% ‐28.8% nm ‐27.2%
2013 16,692 ‐14,451 2,241 ‐1,058 220 1,404 ‐186 1,218 ‐0 221 14 1,425 91 1,516
2014 17,829 ‐15,334 2,495 ‐1,165 224 1,553 ‐145 1,407 42 326 19 1,756 23 1,780
% YoY 6.8% 6.1% 11.3% 10.2% 1.5% 10.6% ‐21.6% 15.5% nm 47.5% 31.1% 23.3% ‐74.6% 17.4%
0.38
0.40
0.28
‐24.9%
‐28.8%
1.21
1.42
17.4%
Gross margin EBIT margin Norm. profit margin
16.0% 10.4% 10.7%
13.4% 8.7% 10.4%
13.6% 7.4% 7.9%
13.4% 8.4% 8.5%
14.0% 8.7% 9.9%
Revenue Structure Chicken processing Feed Farm and Day‐Old‐Chicks Processed Food Total Revenues
1,831 1,310 1,042 223 4,406
1,896 1,363 1,318 240 4,817
1,707 1,252 1,309 229 4,496
7,035 4,811 4,005 841 16,692
7,196 4,887 4,840 906 17,829
Operating margin Chicken processing Feed Farm and Day‐Old‐Chicks Processed Food Avg. Operating margin
8.8% 15.9% 8.5% 1.8% 10.5%
6.6% 17.5% 5.0% ‐0.4% 8.9%
4.1% 23.1% ‐1.2% 0.3% 7.7%
7.8% 14.7% 5.9% 0.2% 9.0%
6.2% 17.8% 5.2% 0.8% 8.8%
EPS (Bt)
‐6.8% ‐4.5% 25.6% 2.6% 2.0%
‐10.0% ‐8.2% ‐0.6% ‐4.6% ‐6.7%
2.3% 1.6% 20.9% 7.7% 6.8%
Source: SET and KTZMICO Research Domestic broiler price has fallen to Bt37‐38/kg due to growing supply The 1Q is the low season for sales and also the time for annual budget closing in Japan, so the orders from Japanese partners have been rather slow. Meanwhile, domestic supply has increased as operators had been prepared for exports to Japan and Russia. With order growth being slower than domestic supply growth, the domestic broiler price has recently fallen to around Bt37‐38/kg (vs. Bt39.8/kg in Jan‐ 15). The price is likely to remain at this low level for some time before picking up during the Songkran break when domestic demand is expected to increase and the high export season is set to begin in late 2Q. This is the normal pattern for the domestic broiler price cycle in Thailand.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 2: Broiler spread and spread margin Spread (Bt/kg) 25.00
Spread margin 50%
40%
15.00
30%
10.00
20%
5.00
10%
0.00
0%
‐5.00
Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10 Oct‐10 Jan‐11 Apr‐11 Jul‐11 Oct‐11 Jan‐12 Apr‐12 Jul‐12 Oct‐12 Jan‐13 Apr‐13 Jul‐13 Oct‐13 Jan‐14 Apr‐14 Jul‐14 Oct‐14 Jan‐15
20.00
Spread
‐10%
Spread margin
‐10.00
‐20%
Source: Office of Agriculture Economics (OAE), KTZ Research 2015‐16E earnings projections cut by 14% We revised down our 2015‐16E earnings projections for GFPT by 13.9% and 14.3% to Bt1.78bn and Bt1.96bn, respectively, to take into account the downward revisions made to: i) sales estimates by 5‐6% and ii) gross profit margin assumptions by 13.75% for 2015‐16. The downward revisions reflect the likelihood of lower‐than‐expected broiler export volume amid the economic slowdown, which prompted us to revise down our export growth assumption to 7% (vs. 10% previously). In addition, our earnings revisions also take into account the current decreases in domestic broiler prices, which should have an impact on the profit margin from the domestic sales of broiler parts, both at GFPT and its affiliates (McKey and GFN). However, we expect the firm’s 2015E net profit to remain stable as it will likely book Bt76mn in tax expenses vs. the tax reversal of Bt42mn booked in 2013. Thus, GFPT’s pre‐tax gain is expected to increase by 8%YoY to Bt1.87bn. Figure 3: 2015‐16E Earning revision Bt m Revenues Gross margin Other income Tax expense Equity income Norm profit EPS (Bt)
Previous 2015E 2016E 20,620 22,897 14.5% 14.5% 210 210 (127) (142) 387 410 2,061 2,283 1.64 1.82
Current 2015E 2016E 19,654 21,611 13.8% 13.8% 220 220 (76) (84) 350 376 1,775 1,957 1.42 1.56
% Change 2015E 2016E ‐4.7% ‐5.6% ‐5.2% ‐5.2% 4.8% 4.8% ‐40.4% ‐40.9% ‐9.4% ‐8.1% ‐13.9% ‐14.3% ‐13.9% ‐14.3%
Source: GFPT, KTZ Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Figure 4: PER Band
PER
Implied
Upside/
(x)
TP (Bt)
Downside
+1.0SD
32.9
46.57
215%
+0.5SD
24.9
35.24
138%
Average
16.9
23.90
62%
-0.5SD
8.9
12.57
-15%
-1.0SD
0.9
1.24
-92%
Note : 15E EPS = Bt1.42
Source: GFPT, KTZ Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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th
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt14.80
Agribusiness January 24, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
2014 earnings in line; 2015‐16 earnings cut by 14%
FY15
FY16
Consensus EPS (Bt)
1.693
1.817
KT ZMICO vs. consensus Share data
‐16.1%
‐14.1%
Reuters / Bloomberg
GFPT.BK/GFPT TB
Paid‐up Shares (m)
1,253.82
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
19.00/570.00
Foreign limit / actual (%)
49.00/17.12
52 week High / Low (Bt)
21.40/12.60
Avg. daily T/O (shares 000) NVDR (%)
3,646.00 5.67
Estimated free float (%)
44
Beta
0.80
URL
www.gfpt.co.th
CGR
Weak broiler price and low season pressure share price Despite our decision to cut the 2015‐16E earnings projections and the target price to Bt21/share (PBV/ROE 0.14x), we still like GFPT for its superior profitability with expected ROE of 19% and strong earnings quality with NI/EBITDA of 73% in 2015. Thus, we believe the stock remains attractive. The short‐term pressure on the share price given the weak broiler prices and low season should present a good opportunity to accumulate the stock. Maintain “Buy”. 4Q14 earnings dropped 23%YoY and 27%QoQ GFPT posted a 4Q14 net profit of Bt368mn (‐23%YoY,‐27%QoQ), in line with both our forecast of Bt381mn and the market estimate of Bt375mn, respectively. The earnings decline was blamed on lower export volume to 6,100 tons (‐5%YoY,‐13%QoQ) due to the low export season. The margin remained sound QoQ owing to higher export prices and a weaker baht. During 4Q14, the domestic broiler price decreased and the profit contribution from affiliates amounted to Bt53mn (+5%YoY, ‐52%QoQ). 2014 net profit grew by 17%YoY GFPT’s 2014 net profit amounted to Bt1.78bn, up 17%YoY. The firm booked FX gain at Bt23mn and core profit of Bt1.76bn, growing by 23%YoY on the back of better sales and profit margin. Furthermore, the profit contribution from its affiliates rose by 47% YoY to Bt326mn. 2015‐16E earnings projections were cut by 14% We revised down our 2015‐16E earnings projections by 13.9% and 14.3% to Bt1.78bn and Bt1.96bn, respectively, to take into account the downward revisions to: i) sales estimates by 5‐6% and ii) gross profit margin assumptions by 13.75% for 2015‐16. The downward revisions reflect the likelihood of lower‐than‐expected export volume amid the economic slowdown and the current decreases in domestic broiler prices. Financial and Valuation FY Ended 31 Dec
2012
2013
2014
2015E
2016E
Revenues (Btmn)
15,370
16,692
17,829
19,654
21,611
Net profit (Btmn)
232
1,516
1,780
1,775
1,957
EPS (Bt)
0.18
1.21
1.42
1.42
1.56
Norm. EPS (Bt)
0.18
1.14
1.40
1.42
1.56
‐81%
555%
17%
0%
10%
Norm. EPS growth (%) Dividend (Bt)
‐
0.35
0.40
0.40
0.44
BV (Bt)
4.68
5.81
6.89
7.90
9.02
2012
2013
2014
2015E
2016E
80.14
12.24
10.43
10.45
9.48
FY Ended 31 Dec
Phornsri Laysanitsaerekul Analyst , no 17621 [email protected] 66 (0) 2624‐6258
PER (x) EV/EBITDA (x)
27.26
10.82
9.36
8.70
7.60
PBV (x)
3.16
2.55
2.15
1.87
1.64
Dividend yield (%)
0.0%
2.4%
2.7%
2.7%
3.0%
ROE (%) Net gearing (%)
3.9% 94%
23.0% 53%
22.4% 38%
19.2% 27%
18.5% 14%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2014 net profit grew by 17%YoY given a wider margin and larger profit contribution from affiliates GFPT’s 2014 net profit amounted to Bt1.78bn, up 17%YoY. The firm booked a FX gain of Bt23mn and core profit of Bt1.76bn, growing by 23%YoY as sales increased by 7% and the gross profit margin widened to 14% (vs. 13.4% in 2013). Another earnings driver was the 47% YoY increase in the profit contribution from its affiliates to Bt326mn. GFPT announced a dividend per share at Bt0.40/share, implying a dividend payout of 28%. The firm will go XD on 6 Mar‐15 and the dividend payment will be made on 30 Apr‐15. The current share price implies a dividend yield of 2.6%. Figure 1: 4Q14 & 2014 earnings review YE Dec (Bt m) Sales COGS Gross profit SG&A expense Others income EBIT Interest expense EBT Tax expense Equity income MI Norm. profit Extra. Items Net profit
4Q13 4,406 ‐3,700 706 ‐313 66 459 ‐43 415 11 51 4 473 4 477
3Q14 4,816 ‐4,171 645 ‐284 60 421 ‐36 385 8 110 5 499 7 506
4Q14 4,496 ‐3,886 610 ‐336 58 332 ‐33 300 8 53 6 355 13 368
% YoY 2.0% 5.0% ‐13.5% 7.5% ‐11.1% ‐27.5% ‐25.1% ‐27.8% nm 4.8% 35.7% ‐24.9% 204.3% ‐22.8%
%QoQ ‐6.6% ‐6.8% ‐5.3% 18.5% ‐3.3% ‐21.1% ‐9.0% ‐22.2% 1.5% ‐51.9% 17.3% ‐28.8% nm ‐27.2%
2013 16,692 ‐14,451 2,241 ‐1,058 220 1,404 ‐186 1,218 ‐0 221 14 1,425 91 1,516
2014 17,829 ‐15,334 2,495 ‐1,165 224 1,553 ‐145 1,407 42 326 19 1,756 23 1,780
% YoY 6.8% 6.1% 11.3% 10.2% 1.5% 10.6% ‐21.6% 15.5% nm 47.5% 31.1% 23.3% ‐74.6% 17.4%
0.38
0.40
0.28
‐24.9%
‐28.8%
1.21
1.42
17.4%
Gross margin EBIT margin Norm. profit margin
16.0% 10.4% 10.7%
13.4% 8.7% 10.4%
13.6% 7.4% 7.9%
13.4% 8.4% 8.5%
14.0% 8.7% 9.9%
Revenue Structure Chicken processing Feed Farm and Day‐Old‐Chicks Processed Food Total Revenues
1,831 1,310 1,042 223 4,406
1,896 1,363 1,318 240 4,817
1,707 1,252 1,309 229 4,496
7,035 4,811 4,005 841 16,692
7,196 4,887 4,840 906 17,829
Operating margin Chicken processing Feed Farm and Day‐Old‐Chicks Processed Food Avg. Operating margin
8.8% 15.9% 8.5% 1.8% 10.5%
6.6% 17.5% 5.0% ‐0.4% 8.9%
4.1% 23.1% ‐1.2% 0.3% 7.7%
7.8% 14.7% 5.9% 0.2% 9.0%
6.2% 17.8% 5.2% 0.8% 8.8%
EPS (Bt)
‐6.8% ‐4.5% 25.6% 2.6% 2.0%
‐10.0% ‐8.2% ‐0.6% ‐4.6% ‐6.7%
2.3% 1.6% 20.9% 7.7% 6.8%
Source: SET and KTZMICO Research Domestic broiler price has fallen to Bt37‐38/kg due to growing supply The 1Q is the low season for sales and also the time for annual budget closing in Japan, so the orders from Japanese partners have been rather slow. Meanwhile, domestic supply has increased as operators had been prepared for exports to Japan and Russia. With order growth being slower than domestic supply growth, the domestic broiler price has recently fallen to around Bt37‐38/kg (vs. Bt39.8/kg in Jan‐ 15). The price is likely to remain at this low level for some time before picking up during the Songkran break when domestic demand is expected to increase and the high export season is set to begin in late 2Q. This is the normal pattern for the domestic broiler price cycle in Thailand.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 2: Broiler spread and spread margin Spread (Bt/kg) 25.00
Spread margin 50%
40%
15.00
30%
10.00
20%
5.00
10%
0.00
0%
‐5.00
Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10 Oct‐10 Jan‐11 Apr‐11 Jul‐11 Oct‐11 Jan‐12 Apr‐12 Jul‐12 Oct‐12 Jan‐13 Apr‐13 Jul‐13 Oct‐13 Jan‐14 Apr‐14 Jul‐14 Oct‐14 Jan‐15
20.00
Spread
‐10%
Spread margin
‐10.00
‐20%
Source: Office of Agriculture Economics (OAE), KTZ Research 2015‐16E earnings projections cut by 14% We revised down our 2015‐16E earnings projections for GFPT by 13.9% and 14.3% to Bt1.78bn and Bt1.96bn, respectively, to take into account the downward revisions made to: i) sales estimates by 5‐6% and ii) gross profit margin assumptions by 13.75% for 2015‐16. The downward revisions reflect the likelihood of lower‐than‐expected broiler export volume amid the economic slowdown, which prompted us to revise down our export growth assumption to 7% (vs. 10% previously). In addition, our earnings revisions also take into account the current decreases in domestic broiler prices, which should have an impact on the profit margin from the domestic sales of broiler parts, both at GFPT and its affiliates (McKey and GFN). However, we expect the firm’s 2015E net profit to remain stable as it will likely book Bt76mn in tax expenses vs. the tax reversal of Bt42mn booked in 2013. Thus, GFPT’s pre‐tax gain is expected to increase by 8%YoY to Bt1.87bn. Figure 3: 2015‐16E Earning revision Bt m Revenues Gross margin Other income Tax expense Equity income Norm profit EPS (Bt)
Previous 2015E 2016E 20,620 22,897 14.5% 14.5% 210 210 (127) (142) 387 410 2,061 2,283 1.64 1.82
Current 2015E 2016E 19,654 21,611 13.8% 13.8% 220 220 (76) (84) 350 376 1,775 1,957 1.42 1.56
% Change 2015E 2016E ‐4.7% ‐5.6% ‐5.2% ‐5.2% 4.8% 4.8% ‐40.4% ‐40.9% ‐9.4% ‐8.1% ‐13.9% ‐14.3% ‐13.9% ‐14.3%
Source: GFPT, KTZ Research
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Figure 4: PER Band
PER
Implied
Upside/
(x)
TP (Bt)
Downside
+1.0SD
32.9
46.57
215%
+0.5SD
24.9
35.24
138%
Average
16.9
23.90
62%
-0.5SD
8.9
12.57
-15%
-1.0SD
0.9
1.24
-92%
Note : 15E EPS = Bt1.42
Source: GFPT, KTZ Research
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DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
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KT•ZMICO Securities Company Limited
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