GFPT

GFPT Plc

Overshot our estimate by 59%
GFPT reported a Bt302m net profit for 2Q13, up by 1,118% YoY and 133% QoQ. The result was 59% higher than our estimate, thanks to a fatter GM than assumed of 11.1% (our assumption was 10%) and a greater GFN net profit than modeled of Bt85m (we had estimated Bt50m). Sales were in line with our model. Gross profit exceeded our estimate by 12%. GFPT booked an Bt8m tax credit in 2Q13.
Result highlights
The robust YoY and QoQ profit jump was led by higher domestic and export chicken sales prices, greater export sales volume and a turnaround at GFN (GFPT holds 49%). GFN has now posted black ink on its bottom-line for two consecutive quarters—Bt85m for 2Q13 (against a Bt90m net loss in 2Q12) and a profit for Bt27m 1Q13—driven by the start-up of a new processed chicken line (capacity of 400 tonnes/month) in May and higher domestic and export chicken sales prices. Total sales rose by 7% YoY and 6% QoQ. GM jumped to 11.1% from 6.9% in 2Q12 and 8.3% in 1Q13.
Chicken meat sales rose 25% YoY (due to higher prices and sales volumes). Animal feed sales dropped 16% YoY (due to lower shrimp feed sales). Processed food revenue jumped 50% YoY. Chicken meat posted Bt140m EBT for 2Q13, against a Bt97m LBT for 2Q12. Despite a drop in shrimp feed sales, the EBT of the feed business jumped 30% YoY. The 2Q13 mean domestic chicken price was Bt46.3/kg, up by 24% YoY and 14% QoQ. The 2Q13 mean export price was US$4,400/tonne, up by 12% YoY and 5% QoQ. 2Q13 export volume was 1,850 tonnes/month, up by 13% YoY and 5% QoQ.
Outlook 
We now forecast a Bt350m net profit for 3Q13 (upgraded from Bt250-300m)—up by 16% QoQ and a turnaround from a Bt24m net loss in 3Q13. The drivers are a sustained strong domestic chicken price (Bt47/kg, up by 32% YoY and 1% QoQ), higher export prices (US$4,500/tonne, up by 8% YoY and 3% QoQ) and export volumes (1,900 tonnes/month, up by 16% YoY and 3% QoQ) and an 11% QoQ rise in GFN’s net earnings to Bt95m.
What’s changed?
We have upgraded our FY13 earnings forecast by 20% to Bt980m to reflect a greater expectation for equity income from GFN (from Bt24m to Bt222m), due to higher domestic chicken and export prices and a fatter GM. Our YE13 PEG-based target price rises 24% to Bt13. 
Recommendation
GFPT is our top pick within Food space, premised on an FY13 earnings jump and a cheap valuation—an FY14 PER of 11x.