Charoen Pokphand Food

Benefit from high season of export BUY

Charoen Pokphand Food Plc (CPF)

- Business to peak in 3Q14

We estimate 3Q14 net profit at B4.04bn, growing 14%qoq and 52.7%yoy.

Excluding extraordinary profit of B1.2bn from sale of investment, the profit

before extraordinary item is B2.84bn or an increase of 30.1%qoq, thanks to

the following factors. 1) Domestic business (42% of total revenue)

tends to show stronger growth because livestock sales would increase

qoq as a result of a high season for food export. At the same time, the

shrimp business would show less loss after farmers have resumed shrimp

farming again; the situation is projected to normalize in 2015. 2) Overseas

business (58% of total revenue) would show higher profit qoq,

thanks to the significantly growing business in Vietnam and Russia. Overall,

profit before extraordinary item in 9M14 is estimated at B6.91bn, reversing

from the loss of B1.4bn in the same period last year and comprising 70% of

our FY2014 forecast.

- Maintain 2014-2015 profit forecast

We maintain our profit forecast in 2014-2015, anticipating earnings in 4Q14

to weaken slightly qoq after the export season passes, in line with the

market’s projection. In addition, 2015 net profit is projected to grow notably

by 30.8%yoy, driven mainly by domestic livestock business from new

export markets, especially Japan and Russia. The aquaculture business

would also show a continued recovery after the vannamei shrimp disease

had receded; most farmers have resumed their shrimp farming again with

reviving confidence toward the disease control measure.

- Give weight to 2015 fair value

We reiterate to buy CPF. 2014 fair value is B34 and 2015 fair value is B36,

based on 2.1x PBV (GGM) and long-term ROE forecast of 17.2%. The

current share price has an upside (dividend yield included) of around 15%

from 2015 fair value.