Year to date, FY18 has been far a stronger year for Japfa than Maybank expected. The upcoming Indonesian presidential elections, forecast of IDR appreciation and a softening in soybean meal prices should provide further tailwinds in coming quarters.
“Taking stock of various protein, dairy and commodity input prices, we raise FY18E/FY19E/FY20E core profit estimates by 23%/9%/9% and target price by 15% to 99 cents,” says analyst Neel Sinha in a Wednesday report.
Maybank also expects higher pork ASPs in 1H19E than initially expected due to supply discipline in Vietnam even as market supply corrected for the new demand levels in the wake of China’s pork import ban.
Meanwhile, China farm gate raw milk production has grown incrementally for the past three months. This could stabilise the threat from European imports and lead to better ASPs in FY19E.
At its current price of 74 cents, Japfa trades at 8.9 times FY19F earnings, a 30% discount to its closest regional mid cap peer PT Malindo Feedmill Tbk and a 16% discount to its subsidiary JPFA.
