Equity Analysis /

Charoen Pokphand Foods: Solid 1Q21 core earnings expected

  • Pig prices jump regionwide except in China and Malaysia

  • Chicken prices up except in Thailand, Laos and Cambodia

  • Insights into 1Q21—a solid YoY and QoQ core profit rise

Bualuang Securities
8 April 2021

Due to a robust rise of regionwide livestock prices in most of CPF’s overseas units, its increased production and sales efficiency and the full-quarter recognition of China’s pork deal effective Dec 2020, we expect its 1Q21 core profit to remain solid. The scope for future upside will come from entering into two new businesses—hemp and plant-based meat. Our BUY rating on CPF stands, premised on its solid 2021 core profit rise and its cheap valuation—2021 PER of 8.5x against its long-term mean of 12.8x.

Pig prices jump regionwide except in China and Malaysia

We saw a jump in live pig prices in most of CPF’s overseas units except in China and Malaysia. China’s 1Q21 mean live pig price was CNY31.2/kg, down 17% YoY and 1% QoQ, due mainly to the panic supply dumping amid the second wave of African Swine Fever (ASF) spread in China in Feb-Mar and the gradual supply increase in the market. Moreover, the widespread news of detection of natural mutation in the ASF virus in China has caused more panic selling onto the market. We still believe this is a rather short-term phenomenon. It has tumbled all the way down to CNY23.3/kg as of Apr 7, down 37% from its recent peak of CNY36.7/kg as of Jan 1. The ASF resurgence in northern and central Vietnam has caused its live pig price to fall 10% from its peak of VND83,500/kg (Jan 23-26) to VND74,833/kg (Apr 7).