GFPT

GFPT Plc

Broiler spread turns to profit in Nov and Dec. Broiler price increased significantly
from Bt32/kg in Oct to Bt44/kg (+38%) since mid-Nov. Costs rose only 3% in the same
period to Bt38/kg, resulting in spread of Bt6/kg over the last one month vs. loss of
Bt5/kg in Oct. Our talk with industry experts confirms the jump in broiler price is due to
a reduction in supply by a big player.

Broiler price to likely rise further over next six months. A discussion with industry
experts leads us to believe that broiler price will likely rise further over the next six
months due to stronger demand during Chinese New Year (in Feb) and Thai New Year
(in April). They also expect higher raw material – soybean meal - cost in 1Q13, with
soybean meal price to fall from 2Q13 onwards on new influx of supply as Brazil and
Argentina begin harvesting in Mar-Apr.

4Q12 profit could be higher than SCBS or market expect. We preliminarily
forecast GFPT to post a profit of Bt24mn in 4Q12, a turnaround from the 3Q12 loss of
Bt24mn and 2Q12 loss of Bt16mn. After a discussion with the company, we believe our
forecast is on the conservative side and 4Q12 profit could be as high as Bt65mn. This
would give it a small profit of Bt11mn for the year, much better than the loss of
Bt30mn forecast by SCBS and the market.

Next year we expect strong profit supported by significantly higher spread. We
estimate average broiler price for 2012, assuming broiler price stays at current levels
through yearend, of Bt37/kg, down 20% YoY, with spread averaging Bt0.8/kg vs.
Bt11.2/kg in 2011. Broiler price has come back faster than we expected with spread
now at Bt6/kg, close to our 2013F assumption of Bt7/kg. We are thus optimistic
towards 2013 and forecast a profit of Bt908mn, supported by higher spread and a
small contribution from its associate GFPT Nichirei (GFN), in which GFPT holds 49%.

BUY, turnaround story to act as catalyst for stock price. GFPT stock price is up
14% over the last month on hopes of better earnings prospects next year. However
given the more rapid onset of the turnaround than expected, the stock will continue
to rise, especially since YTD it is still down 20% vs. SET +33%. There is upside risk to our
end-2013F TP of Bt8.5/sh which is based on PER of 11.8x (+1std above historical
average). Historically, GFPT trades at a PER of 16-20x when hopes of earnings recovery
are high.