Moreover, in light of the resurgence of the African Swine Flu (ASF) outbreak, the analyst believes that there is a weak near-term outlook for Japfa’s Vietnam swine operation. This is compounded by existing Covid-19 movement restrictions that influenced softer swine prices.
However, Widjaja remains positive on certain aspects of Japfa’s business, such as strong broiler prices in Indonesia with the upcoming Ramadhan season and favourable raw milk prices in China.
Some risks include a surge in Covid-19 infections, higher-than-expected raw material costs, weaker-than-expected consumer demand, and greater or continued outbreak of diseases that would lead to price volatility.
In her report dated March 24, Widjaja has kept her target price unchanged at 67 cents, as she has kept her EBITDA forecasts for the FY2022/FY2023 the same following Japfa’s FY2021 results.
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“We used a sum-of-the-parts valuation and pegged our valuation of Animal Protein Indonesia to our target price for Japfa Comfeed Indonesia (JPFA) at 2,060 rupiah (19.46 cents), while valuations of its Animal Protein Others and Dairy segments are based on FY2022 EV/EBITDA,” she writes.
“Our target price implies a 7.9x FY2022 P/E. Japfa currently trades at an FY2022 EV/EBITDA of 5x and an FY2022 P/E of 7x, which is lower compared to the average of its regional peers in the animal protein and dairy sector, which is at an FY2022 EV/EBITDA of 10x and an FY2022 P/E of 14x,” she continues.
As at 11.19am, shares in Japfa are trading at 1.5 cents up or 2.36% higher at 65 cents at an FY2022 P/B of 0.6x and dividend yield of 1.6%.
