Charoen Pokphand Foods

Charoen Pokphand Foods Plc (CPF) 

 

What’s new?  

We visited C.P. Cambodia (CPC), CPF’s indirect wholly-owned subsidiary via CPF Investment Limited, on June 8. CPC operates a fully-integrated agribusiness (feed, farm and food), which includes a feed mill, breeder and hatchery farms for pig, broilers and traditional chicken and a processed food plant. Its farms accounted for 77% of its FY14 total sales—pigs (59%) and chicken (18%)—followed by feed (18%) and food (3%). Its Phnom Penh feed mill’s full capacity is 318k tonnes/annum. Combined pig and chicken production capacity is 75m tonnes/annum and its processed food capacity is 2.6k tonnes/annum. 

Its FY14 total sales were Bt8.3bn (a CAGR of 22.6%, FY11-14). Its FY14 net profit was Bt744m (a CAGR of 33.1%, FY11-14). Its FY14 GM and NM were 20% and 9%, respectively. Its FY14 sales and net profit were 2% and 7% of CPF’s FY14 sales and net profit, respectively. 

CPC holds biggest feed and farm market shares in Cambodia 

CPC has captured a 30% market share of both the pork and chicken meat in Cambodia (followed by Betagro’s 5%). It also has a 50% market share of the feed business (followed by Betagro, China’s East Hope and Vietnam’s Green Feed). The CAGR of feed consumption in the country was 13.4%, FY09-14 and is estimated at 16%, FY15-18, which is line with the projected Cambodian GDP growth of 7%, FY15-18. Chicken and pork consumption grew at CAGRs of 7% and 5%, respectively, FY09-14, and they are projected at CAGRs of 8% and 6%, respectively, FY15-18. Cambodia currently imports live pigs from Thailand and Vietnam totaling about 1,000 heads/day in 2014.

Capacity expansion in Pailin 

CPC plans to build a new feed mill in Pailin with the full capacity of 15k tonnes/month (its existing capacity is 30k tonnes/month). The test-run of the mill is expected in late July 2015. We believe that it will represent CPC’s growth driver from 2H15-FY16. It also aims to increase the food portion of its business from its current 3% to 10% in the next five years through modern trade and food service channels. We project CPC’s FY15 sales to reach Bt10bn (up 20% YoY) and its FY15 net profit to be Bt855m (up 15% YoY), led by feed and food business expansion.

CPC’s pork and chicken margin higher than Thailand’s

The farm-gate pork price in Cambodia is Bt70/kg. Its farm-gate broiler and traditional chicken prices are Bt50-60/kg and Bt90/kg, respectively. Despite energy costs inherent in its cost structure that are 3-5% higher than those in Thailand, its livestock margins are higher led by its farm-gate meat prices, especially chicken, that are greater than Thailand’s. We reiterate our BUY call on CPF due to a shallower loss at the Thai shrimp unit and the improved performance of overseas units in 2H15.