Agri-business sector

Chicken business: no fear Neutral

Agri-business sector

- GFPT, CPF's share prices drops during Vegetarian Festival

Yesterday, GFPT and CPF 's share prices fell 4.4% and 1%, respectively.

Ten-day Chinese Vegetarian Festival has started, temporarily lowering

chicken demand as usual. According to three-year statistics, live chicken

price tended to fall 3-5% during Chinese Vegetarian Festival. However,

chicken business has been prosperous this year, likely to remain strong in

2015. Live chicken price has stood at B45-46/kg for over one month

because chicken export (to Japan and Europe) has increased in high season

and Japan has banned import of chicken from China due to poor quality. In

addition, Russia has boycotted import of chicken from the US due to the

Ukrainian crisis. As the Ukraine-Russia conflict is not likely to end in the

near future, it might boost Thailand's chicken export in 2014 as well as

2015.

- Strong fundamental factors in 2015

GFPT's net profit is estimated to grow by 42.4%yoy in 2014 and 21.7%yoy

in 2015. Likewise, CPF's earnings are projected to rise by 40.4%yoy in 2014

and 30.8%yoy in 2015. GFPT and CPF would have a turnaround in the near

future, probably outperforming SET. Aside from higher export of chicken

and feed (CPF, GFPT), shrimp business (CPF) would rebound in 2015 and

generate more profit.

Moreover, feed mill raw material (corn and soybean meal) cost has dropped

in harvesting season, boosting GFPT and CPF's gross profit margin.

- Good entry point for GFPT, CPF

With strong fundamental factors, we recommend BUY for GFPT(FV@B22 in

2014; FV@B27 in 2015) and CPF(FV@B34 in 2014; FV@B36 in 2015),

hoping for their FY2015 fair value. As their share prices are low, this is a

good entry poin