Equity Analysis /

GFPT PCL: Key takeaways from domestic NDR

  • Well-balanced chicken supply and demand dynamics thus far

  • Robust GM in 2Q-4Q22 fueled by higher export volume and prices

  • Expanded operational guidance for 2022

Bualuang Securities
8 June 2022

We invited GFPT to our domestic NDR on Jun 2. The feedback from NDR was broadly positive, led by the anticipated fatter GM and robust earnings in the remaining quarters of 2022 (increased export volume, higher export and domestic prices and GFN’s turnaround). We believe that the scope for an upside will come from higher capacity utilization of its five cooked-chicken lines in 2H22. It is our sectoral top pick. Its valuation remains attractive—2022 PER of 14.5x vs its up-cycle PER of 20x.

Well-balanced chicken supply and demand dynamics thus far

The firm attributes the recent spike of domestic live chicken price (from Bt38/kg to Bt43/kg) in 1H22 to: 1) the cost push of raw materials, 2) tighter chicken supply (related to the consumption switch from pork to chicken due to the spike of pork price caused by the ASF outbreak) and 3) stronger export demand and domestic byproduct consumption. The largest weight was assigned to the feed cost push, followed by tighter chicken supply despite the fact that chicken-raising quantity has so far risen from 34-35m birds/week in late-2021 to 36-37m as of now. Given its cost of production of about Bt40/kg (if compared with the farmgate chicken price), we still expect a decent profit from the current chicken price. It views that the sustained high feed costs will disincentivize huge chicken supply expansion and the current chicken price reflects the industry’s more balanced chicken supply-demand dynamics.