GFPT

GFPT Plc (GFPT)
32% above our estimate
GFPT reported a Bt607m net profit for 3Q13, up from Bt2m in 3Q12 and Bt302m in 2Q13. The result was 32% higher than our model, thanks to a fatter GM (18.2%; our assumption was 16%) and lower SG&A and tax expenses than assumed.
Result highlights
The YoY profit jump was due to drops in raw material prices, higher domestic and export chicken prices, greater export sales volume and a turnaround at GFN. The QoQ jump was led by high season for exports, rises in export chicken prices, higher feed and domestic sales volumes, drops in raw material prices and a greater GFN profit.
GFN posted black ink on its bottom-line for the third consecutive quarter—Bt116m for 3Q13 against a Bt50m net loss in 3Q12 and a profit of Bt85m for 2Q13—driven by the start-up of its new processed chicken line in May and higher domestic and export chicken sales prices. GM jumped to 18.2% from 5.5% in 3Q12 and 11.1% in 2Q13.
Chicken meat sales rose 28% YoY (due to higher domestic and export prices and sales volumes). Animal feed sales slipped 7% YoY (shrimp feed sales were lower). Processed food revenue jumped 53% YoY. Chicken meat posted EBT of Bt177m in 3Q13 against a Bt73m LBT for 3Q12. Despite lower shrimp feed and total feed sales, the EBT of the feed business jumped 278% YoY, driven by dives in the prices of raw materials. The 3Q13 mean export price was US$4,826/tonne, up by 16% YoY and 10% QoQ. Export volume during the quarter averaged 1,767 tonnes/month, up 8% YoY but down 7% QoQ.
Outlook 
We forecast a Bt300m net profit for 4Q13—up 547% YoY but down 51% QoQ, due to seasonality. The drivers of the expected YoY jump are lower corn and SBM prices, a higher export price (US$4,585/tonne; up 13% YoY) and GFN’s turnaround (from a Bt66m net loss in 4Q12 to a projected Bt90m net profit). Further ahead, in 1H14 Japan might lift its ban on raw chicken imports from Thailand, while Saha Farms—a major competitor—appears to have a crippling shortage of working capital (its current slaughtering rate is currently only 80-90k birds/day).
What’s changed?
We have upgraded our earnings forecasts by 17% to Bt1.34bn for FY13 and by 7% to Bt1.47bn for FY14 to factor in the consensus-beating 3Q13 numbers and lower assumptions for FY14 raw material prices. As such, our YE14 PEG-based target price rises 5% to Bt16.3. 
Recommendation
GFPT is our top pick within Food space, premised on a cheap valuation.