Charoen Pokphand Foods

Charoen Pokphand Foods Plc (CPF) 

We expect CPF’s earnings to recover by year-end as meat and raw-material prices normalise. Longer term, we remain positive on CPF, given its defensive yet
growing business and improving risk profile from revenue diversification. Nevertheless, we lower our FY12-14 EPS to adjust for new raw-material and food price
assumptions. This lowers our SOP target price. After its recent share-price weakness in July, we believe the bad news has been priced in, providing attractive entry
opportunities. 

Commodity prices affecting feed and farms in near term
Corn and soybean, CPF’s principal raw materials for its feed business, have jumped YTD (10% and 50% respectively), while meat prices have
fallen at least 10%, taking CPF’s share price down with them. We expect positive stock performance along with our expectation of a meat price
recovery by 4Q, while soybean and corn prices should normalise by early next year.