Equity Analysis /

Charoen Pokphand Foods: Rebound of Chinese and Vietnamese pork prices expected in 2Q23

  • Insights into 4Q22—a YoY core turnaround

  • Rebound of Chinese pork price starting 2Q23 onward

  • The ASF resurgence in Thailand to bolster Thai pork price

Bualuang Securities
25 January 2023

Turnarounds at CTI and CPP led by expected bounces of Chinese and Vietnamese pork prices upon reopening and a jump of equity profits from CPALL and MAKRO are boons to CPF’s 2023 profit growth. Its valuation is cheap—2023 PER of 12x against its mean of 13.2x.

Insights into 4Q22—a YoY core turnaround

We estimate a Bt2.2bn net profit for 4Q22, down 67% YoY and 57% QoQ. Excluding the FX item, loss from biological assets (mainly Vietnam and Thailand) and gain from trading CPALL shares, we estimate a Bt2.48bn 4Q22 core profit, a YoY turnaround but a 55% QoQ drop. The YoY core turnaround is led by: 1) hikes in pork prices in Thailand (up 32% YoY), China (up 43%), Vietnam (up 29%), Laos (up 84%), Malaysia (up 84%) and Taiwan (up 13%), 2) a jump in chicken prices in Thailand (up 35% YoY), Vietnam (up 19%), Laos (up 53%), India (up 12%) and Taiwan (up 9%), 3) the profit hike of CTI (China-based pork affiliate) via the equity income, 4) CPP’s turnaround and 5) a jump in CPALL’s and MAKRO’s core profits via equity income, outweighing the further rise in raw material costs, bigger loss of HyLife, higher SG&A expense and a jump in interest expense. The QoQ core profit tumble is due to low seasons for exports and aquaculture, weaker pork prices in Thailand (down 1% QoQ), Vietnam (down 14%) and Cambodia (down 26% QoQ). We model GM of 14% in 4Q22, against 7.1% in 4Q21 and 15% in 3Q22.