GFPT

GFPT Plc

Slightly above estimate: GFPT reported a Bt219m net profit for 4Q11, flattish YoY and down 41% QoQ. There was a Bt22m tax credit for the quarter. Pre-tax profit tumbled by 20% YoY and 51% QoQ. Reported net earnings exceeded our estimate by 4% because of the tax credit (we had modeled for a tax provision) and a shallower net equity loss from affiliates than expected (MacKey posted a higher net profit than assumed). Sales were in line with our projection, while gross profit was 2% ahead of our number.
Results highlights: The YoY core operational slippage was attributable to lower export prices and falls in export and domestic sales volumes. The QoQ drop was because of low season for exports and aquaculture feed sales and declines in export prices and sales volumes (dampened by the flooding). GFN posted a 4Q11 net loss of Bt98m, shallower by 14% YoY and 33% QoQ because it operated at its maximum capacity of 100,000 birds/day slaughter in Dec 2011. GM dropped to 12.3% from 16.9% in 3Q11 and 14.1% in 4Q10.
Sales rose 10% YoY but declined 8% QoQ. The YoY rise was driven by increased sales of live chickens to GFN (chicken farming sales jumped 201% YoY). Feed sales rose 20% YoY—both livestock and aquaculture feed sales expanded, despite the flooding. Chicken meat sales slumped by 23% YoY and 13% QoQ, due to drops in export prices and export and domestic sales volumes. The average domestic chicken price was Bt40/kg in 4Q11, up 3% YoY but down 2% QoQ. In terms of EBIT, live chicken sales to GFN, chicken meat sales and animal feed sales posted YoY declines.
Outlook: We expect weak 1Q12 earnings, given reduced export prices and sales volumes and a lower mean domestic chicken price—Bt38/kg QTD against Bt48/kg in 1Q11 and Bt40/kg in 4Q11. We suspect that GFPT’s domestic chicken operation is currently running at a loss, given the prevailing chicken price of Bt36/kg against a production cost of Bt37-38/kg. 
What’s changed? We maintain our FY12 net profit forecast unchanged.
Recommendation: Our TRADING BUY rating stands, premised on a domestic chicken price rebound during 2H12, brought about by a chicken consumption recovery, GFN breaking even in 2Q12 and speculation that the EU will lift its ban on Thai raw chicken imports in June.