GFPT

GFPT Plc Investment thesis: We have downgraded our rating for GFPT from BUY to HOLD in anticipation weak 2Q12-2H12 numbers. There is little scope for the domestic chicken price to rise till YE12 or for GFN to turn around until FY13. We have cut both our FY12 and FY13 profit forecasts by more than half to factor in diminished expectations for both domestic and export prices. Our YE12 target price dives 37% to Bt8.50. Poor 2Q12 earnings expected: We estimate a Bt35m net profit for 2Q12, down by 90% YoY but a QoQ turnaround from the Bt14m net loss posted for 1Q12. Our new 2Q12 estimate is much lower than our earlier expectation of Bt130m. The assumed YoY profit tumble is due to a 28% YoY dive in the mean domestic chicken price—Bt37/kg versus Bt52/kg. The QoQ turnaround is because of an 8% rise in the domestic chicken price since 1Q12 and seasonally higher export sales. The consolidated operation would have made a loss in April, then modest profits in May and June. 2Q12 chicken export volume better: We assume that chicken export volume rose to 1,800 tonnes/month in 2Q12 from 1,033 tonnes/month in 1Q12. This number is stronger than our previous estimate of 1,300-1,400 tonnes/month. Feed sales should also have risen 5-10% QoQ on seasonality. GFN will post a Bt107m net loss (against a 1Q12 loss of Bt112m). GFN break-even delayed to FY13: The domestic chicken price declined to Bt34/kg in late July from Bt37/kg earlier in the month, due to chicken-dumping by Saha Farm, a major operator—its plan to export to the EU was delayed by red tape. The EU lifted its ban on raw chicken imports from Thailand only for birds hatched on July 1 or later. Given a 45- to 60-day raising cycle, chicken exports to the EU may resume in Aug-Sept. Given the sustained low chicken price in 2H12, due to oversupply and the rainy season, GFN doesn’t look likely to post a profit till FY13. FY12-13 earnings downgrade: We have downgraded our earnings forecasts by 58% to Bt353m for FY12 and by 51% to Bt770m for FY13, chiefly because we cut our mean domestic chicken assumptions to Bt32/kg (from Bt35/kg) for FY12 and to Bt37/kg (from Bt45/kg) for FY13. We have also upped our corn and soybean meal price assumptions for FY13 by 5% and 11%, respectively.