GFPT

GFPT Plc

Investment thesis
Following the preview conference call, we expect GFPT to post record earnings for 3Q13, followed by a strong YoY 4Q13 number. The stock is our top pick within Food space, premised on relatively clear earnings visibility in 2H13-FY14 and a cheap valuation—PERs of 10.4x for FY13 and 8.6x for FY14.
Anticipate record earnings for 3Q13
We estimate a Bt460m net profit for 3Q13, up 52% QoQ and a reversal from the Bt24m net loss posted for 3Q12. We previously modeled for a net profit of only Bt350m for the quarter—export prices proved to be higher than we had assumed. The YoY turnaround is thanks to tumbles in raw material prices, greater chicken export price and volume, a higher domestic chicken price and a turnaround at GFN. The QoQ profit jump is led by high season, a better export chicken price, further drops in raw material costs and a greater GFN net profit.
Sales are estimated to have risen by 13% YoY and 7% QoQ. We assume GM of 16% against 5.7% in 3Q12 and 11.1% in 2Q13. GFN should report a Bt120m net profit for 3Q13, up 41% QoQ and a turnaround from the Bt50m loss posted for 3Q12, led by fatter margin at its new processing line and higher domestic and export chicken prices. Total feed sales volumes would have been flattish YoY and have risen 7% QoQ. The mean feed sales price dropped 10% YoY and was flattish QoQ.  
The 3Q13 mean domestic chicken price was Bt44.7/kg, up 25% YoY but down 4% QoQ. The average corn price was Bt9.3/kg, down by 16% YoY and 9% QoQ. The SBM price was Bt17.3/kg, down by 17% YoY and 4% QoQ. GFPT’s average export price is estimated at US$4,829/tonne, up by 16% YoY and 10% QoQ; its export volume is assumed at 1,900 tonnes/month, up 16% YoY and flattish QoQ.
YoY turnaround expected for 4Q13
Although the domestic chicken price tumbled in October-to-date, due to flooding and the vegetarian festival, which will make for a slimmer profit for the month, we expect a seasonal bounce in the chicken price in November with the start of high season. We preliminarily forecast a Bt250-300m net profit for 4Q13, up by 247-316% YoY (driven by lower corn and SBM prices, higher export prices and the GFN turnaround) but down 35-46% QoQ (due to low season for exports).
FY13-14 net profit and target price upgrades
We have revised up our net profit forecasts by 17% to Bt1.15bn for FY13 and by 13% to Bt1.38bn for FY14 to factor in new lower assumptions for corn prices—down by 10% to Bt10/kg for FY13 and by 7% to Bt10.5/kg for FY14. As such, our PEG-derived YE14 target price rises to Bt15.5 from Bt13.5.