麦格理亚太地区农业行业印尼家禽是时候退缩了201932936页

Pleaserefertopage34forimportantdisclosuresandanalystcertification,oronourwebsite–expectlowerpricesfrom2H197Valuationcomps11CharoenPokphandIndonesia(CPINIJ)13JapfaComfeedIndonesia(JPFAIJ)23Poultrycompanies’revenuebreakdown(2018)Source:Companydata,MacquarieResearch,March2019PeersCompsTickerRatingPrice(lcy)TP(lcy)PE(x)P/BV(x)CPINUP7150520028.05.6JPFAN195020009.01.9MAIN*NR1600n.a14.91.7*Nonrated,usedBloombergconsensusforecast,pricesasof28March2019Source:Bloomberg,MacquarieResearch,March2019AnalystsPTMacqu[e-mail]ochickenoutKeypointsInitiatingwithacautiousview-waitforabetterentrypointandbetterclarityonIndonesianpoultry.Weseealowmarginofrelativesafety.Keyrisks:broilerpricesfallfurther(-15%YoY)in1Q19E,DOCpricestrendlowerin2H19.ExpectmuchlowerincrementalgrowthrateinFY19.WeareinitiatingcoverageofCPIN,withanUnderperformrating,andofJPFAwithaNeutral(all19consensusratingsarebuys).WeinitiatecoverageoftheIndonesiapoultrysectorwithanegativeview;wehaveanUPratingonCharoenPokphandIndonesia(CPIN)andaNonJapfaComfeedIndonesia(JPFA).WebelievecurrentvaluationsarebakinginthecontinuationofthestrongFY18performances,andprovidingalowmarginofrelativesafety(CPIN’sPEisat+3stddev),aswebelievethefollowingkeyriskswillmaterialise:1)acontinuationofthelowerbroilerpricesseenin1Q19(-14%YoY);and2)lessupsidefromthecurrentday-old-chicks(DOC)price.WebelieveboththeseissueswilllikelymateriallylimittheoutlookforFY19growth.BroilerpricesonamajordownswingBroilerscontributed73%and40%,respectively,oftheFY18incrementalEBITgrowthforCPINandJPFA.The1Q19broilerpriceistracking15%lowerthanthe1Q18price,indicatingweakerdemandandhighersupply.Incontrasttothe16%YoYriseinFY18,weexpectbroilerpricestodecline6%YoYinFY19.WebelievebroilerswillnotcontributetoCPIN’sFY19EBIT(barelybreakingeven)whiletheircontributiontoJPFA’sEBITwillfallby75%.Broilers’revenuecontributionhasgrownoverthelastthreeyearsforbothCPIN(from0%in2014,to29%in2018)andJPFA(34%to40%),duetolossesatnon-integratedbroilerfarmersoverthelastfiveyears(except2018).Theselossesreducedtheproportionofindependentfarmerstototalbroilerfarmerstolessthan20%in2018.Hence,theintegratedplayershavehadtogrowbroilersandworkwithmorecontractfarmers,providingthembuybackguarantees.Broilerpricescanbeveryvolatile,addingtothevolatilityofthebusiness.LimitedupsidefromDOC;pricestofallfrom2H19DOCwasthesecondmajorcontributortoincrementalFY18EBITgrowthforCPINandJPFAat30%and45%,respectively.WeexpecttheDOCpricetofall3%YoYinFY19vsthe34%surgeinFY18.ThepoultrybreedingcompaniesassociationinIndonesia(GPPU)hasannouncedthatimportsforthe2018grandparentstock(GPS)cameinat707k(+9%YoY),anditexpects2019importstogrow5-6%.ThiswouldtranslatetohighersupplyofDOCinoneyear.CPINandJPFA,bothDOCbreeders,enjoyedastrongDOCpriceinFY18duetoathree-yearconsecutivedeclineinGPSimports,fromapeakof725kin2014to650kin2017.ThisyearwillbethefirsttoseehigherDOCsupply,afterthreeyearsofconsecutivedecline;hence,thestrongpricesmaynotlast.TimetochickenoutWeexpectFY19NPATtofall8%YoYforCPIN,butrise9%YoYforJPFAduetonoFXlossesandlowertax.OurNPATforecastsforCPIN/JPFAare-13%/-13%lowerthanconsensus.WeexpectCPIN’svaluationtode-ratefromthecurrent+3stddev,althoughJPFAmightseesomeoverhangonitsreratingprospectsduetoweakerindustryprofitabilityandasitsmajorshareholderistryingtoreduceitsstakeinthecompany.48%36%58%11%9%21%29%36%19%8%4%2%3%15%0%20%40%60%80%100%CPINJPFAMAINFeedDOCLivebird/BroilerProcessedfoodMacquarieResearchIndonesiaPoultry29March20192TimetochickenoutWeinitiatecoverageoftheIndonesiapoultrysectorwithacautiousview,withpreferencetoJapfaComfeed(JPFAIJ,Neutral,TP:Rp2000)thanCharoenPokphand(CPINIJ,Underperform,TP:Rp5200).Wethinkcurrentvaluationprovideslowmarginofsafetyandhasnottakenintoaccounttheserisks:Downsideswingfrombroilerprices.StrongEBITgrowthin2018wasmainlydrivenbyrisingbroilerprices(+16%YoY).However,thebroilerpricetrendobservedin1Q19declinedby15%YoY,indicatingaweakdemandandhighersupply.Ifthetrendcontinues,thiscouldbeamajordownsideswingtoearnings,asbroilerwasthemaingrowthcontributorinFY18EBITforJPFAandCPIN.LimitedupsideonDOCprices,trendinglowerin2H19onward.TheimpactfromhigherGPSimportquotain2018(+8.7%YoY)shouldbefeltthisyear.ThiswouldlimitafurtherDOCpriceincrease.Weevenprojecta3%/5%declineinthepricesfor19e/20e,fromastrongsurgeof+34%inFY18.Fig1RecommendationandTPforIndonesiapoultryTickerNameMarketcap(US$bn)RatingCurrentprice(localccy)TP(localccy)12-mthTSRCPINCharoenPokphand8.8UP71505200-26%JPFAJapfaComfeed1.98N195020006.4%Source:FactSet,MacquarieResearch,March2019OurTPforCPINimplies2020EPEof20x,3.6xPBVwithan18%ROE,whileourJPFATPimplies12xPE,1.81xPBV,withan18%ROE.CPINiscurrentlytradingat2020EPEof29xandPBVof5.3x,thislevelofvaluationisatits+3ofitsstandarddeviation.Thecurrentsharepricelevelisvaluingpeakearningsatahistoricalpeakmultiple.JPFAiscurrentlytradingat20