GFPT

GFPT Plc
Investment thesis: Following a visit to the GFN plant, we remain optimistic that GFN will break even in 3Q12, led by rebounds in the domestic chicken price and the processed chicken export price. Domestic chicken prices will rise as supplies tighten with the resumption of raw chicken exports to the EU, starting July 2012. We reiterate our BUY rating, based on a GFN bottom-line turnaround in 3Q12 and a consolidated bottom-line turnaround in 2Q12.
GFN plant visit: We visited the GFN plant (or GFPT Nichirei [Thailand])—a joint venture between Nichirei Foods (51%) and GFPT (49%). The Bt1.2bn firm was founded in Nov 2008 and started operating in 4Q10. Its two main businesses are a slaughter house (100,000 birds/day capacity) and a processing plant for the exported cooked products (1,400 tonnes/month capacity, of which 71% goes to Japan, the remainder to the EU). The plant is fully integrated, starting from GFPT inputs of feed, breeders and live birds, through to GFN processing the birds into fresh meat, food and frozen food products.
QoQ turnaround in 2Q12: We estimate a Bt130m net profit for 2Q12, down 64% YoY but a QoQ turnaround from a Bt14m net loss in 1Q12. The turnaround is led by a higher domestic chicken price—a Bt39/kg average in 2Q12 versus Bt35/kg in 1Q12—and high season for exports. The consolidated operation in April would still have been in the red, due to a low domestic chicken price (Bt32/kg mean), but we estimate a consolidated net profit for May, thanks to a jump in the domestic price (to Bt39/kg) and greater export volume. Chicken export volume will rise to 1,300-1,400 tonnes/month in 2Q12 from 1,033 tonnes/month in 1Q12). Feed sales will increase 5-10% QoQ on seasonality.
GFN expected to break even in 3Q12: Management remains optimistic that GFN will make a profit in 3Q12, buoyed by a mean domestic chicken price of above Bt45/kg. The expected domestic chicken price rise in 3Q12 will be led by tighter supply, brought about by the resumption of raw chicken exports to the EU, effective July 2012. Moreover, the processed chicken export price should increase in 3Q12 in response to a higher domestic chicken price during May-June 2012. Note that 60% of GFN’s revenues are from exports.