GFPT

GFPT Plc

Investment thesis
Following the analyst meeting, we remain confident in GFPT’s FY14 earnings growth outlook (albeit slower than in FY13), driven by domestic and export sales volumes, a modest rise in domestic prices and a higher GFN profit. Our BUY rating stands, premised on a cheap valuation of 9.9x (based on our new FY14 earnings forecast) with an upgraded YE14 target price to Bt17.7, up 9% from out earlier target.
4Q13 results recap—far above our estimate
GFPT reported a Bt464m net profit for 4Q13, up 96% YoY but down 24% QoQ. The 4Q13 number exceeded our estimate by 54%, thanks to stronger export volume, export prices and blended GM than assumed. The YoY jump was led by higher export volume (up 9% YoY to 2,133 tonnes/month), stronger mean prices for exports (up 12% to US$4,540/tonne) and domestic sales (up 4% to Bt39.3/kg), the turnaround of GFN (from a Bt66m loss in 4Q12 to a Bt61m profit in 4Q13) and a fatter chicken meat margin (due to higher domestic chicken prices and a lower corn price). The QoQ decline was due to a softer domestic chicken price and seasonally high SG&A expenses.
GM jumped to 16.2% in 4Q13 from 7.3% in 4Q12 (but was down from 18.2% in 3Q13). Chicken meat sales in 4Q13 rose 8% YoY (due to higher export and domestic prices and export volumes). Animal feed sales slipped 5% YoY (lower shrimp feed sales).
Robust earnings momentum to continue into 1Q14
We model for a Bt400m net profit for 1Q14, up 208% YoY (but down 14% QoQ), led by greater domestic prices and margin, higher export prices and volume and an increased GFN profit. We estimate 2,000 tonnes/month mean export volume in 1Q14, up 13% YoY but down 6% QoQ, driven by export expansion to Malaysia. GFPT exported 2,000 tonnes in January, of which 200 tonnes was raw chicken. We expect a US$4,400/tonne mean export price in 1Q14, up 5% YoY but down 3% QoQ. GFN will post a Bt40m 1Q14 net profit, up 48% YoY (but down 34% QoQ, due to softer export prices).
FY14 earnings forecast upgraded 12%
Sales will rise 8% this year, we forecast, led by 13% volume growth (both domestic and export volume) and small increases in the prices of by-products. Export volume will rise 15% in FY14, driven by raw chicken exports to Japan and Malaysia. Mean export prices will, however, retreat 5% from the high FY13 export price base. We expect the mean FY14 domestic chicken price to rise 3% to Bt44/kg, led by tighter nationwide chicken supplies (Saha Farm’s output has dived) and growth in raw chicken exports to Japan. We have upgraded our FY14 earnings forecast by 12% to Bt1.64bn to factor in expanded expectations for export volume to Japan and a lower corn price.