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GFPT

Excellent 4Q13 results; FY14 earnings forecast upgrade

GFPT Plc

Investment thesis

Following the analyst meeting, we remain confident in GFPT's FY14 earnings growth outlook (albeit slower than in FY13), driven by domestic and export sales volumes, a modest rise in domestic prices and a higher GFN profit. Our BUY rating stands, premised on a cheap valuation of 9.9x (based on our new FY14 earnings forecast) with an upgraded YE14 target price to Bt17.7, up 9percent from out earlier target.

4Q13 results recap—far above our estimate

GFPT reported a Bt464m net profit for 4Q13, up 96% YoY but down 24% QoQ. The 4Q13 number exceeded our estimate by 54%, thanks to stronger export volume, export prices and blended GM than assumed. The YoY jump was led by higher export volume (up 9% YoY to 2,133 tonnes/month), stronger mean prices for exports (up 12% to US$4,540/tonne) and domestic sales (up 4% to Bt39.3/kg), the turnaround of GFN (from a Bt66m loss in 4Q12 to a Bt61m profit in 4Q13) and a fatter chicken meat margin (due to higher domestic chicken prices and a lower corn price). The QoQ decline was due to a softer domestic chicken price and seasonally high SG&A expenses.

GM jumped to 16.2% in 4Q13 from 7.3% in 4Q12 (but was down from 18.2% in 3Q13). Chicken meat sales in 4Q13 rose 8% YoY (due to higher export and domestic prices and export volumes). Animal feed sales slipped 5% YoY (lower shrimp feed sales).

Robust earnings momentum to continue into 1Q14

We model for a Bt400m net profit for 1Q14, up 208% YoY (but down 14% QoQ), led by greater domestic prices and margin, higher export prices and volume and an increased GFN profit. We estimate 2,000 tonnes/month mean export volume in 1Q14, up 13% YoY but down 6% QoQ, driven by export expansion to Malaysia. GFPT exported 2,000 tonnes in January, of which 200 tonnes was raw chicken. We expect a US$4,400/tonne mean export price in 1Q14, up 5% YoY but down 3% QoQ. GFN will post a Bt40m 1Q14 net profit, up 48% YoY (but down 34% QoQ, due to softer export prices).

FY14 earnings forecast upgraded 12%

Sales will rise 8% this year, we forecast, led by 13% volume growth (both domestic and export volume) and small increases in the prices of by-products. Export volume will rise 15% in FY14, driven by raw chicken exports to Japan and Malaysia. Mean export prices will, however, retreat 5percent from the high FY13 export price base. We expect the mean FY14 domestic chicken price to rise 3% to Bt44/kg, led by tighter nationwide chicken supplies (Saha Farm's output has dived) and growth in raw chicken exports to Japan. We have upgraded our FY14 earnings forecast by 12% to Bt1.64bn to factor in expanded expectations for export volume to Japan and a lower corn price.




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