Equity Analysis /
Thailand

Charoen Pokphand Foods: The laggard play

  • CTI’s operations anticipated to turn around in 2H22

  • CPP’s operational turnaround in 2H22 against 1H22

  • Fatter profits of Thai pork and Thai chicken units in 2H22

Bualuang Securities
14 September 2022

CPF’s 2H22 core operations are likely to turn around HoH, fueled by the 2H22 turnarounds of both CTI and CPP and the fatter margins of Thai pork and Thai chicken units. Along with its attractive valuation—2022 PER of 14.5x against its recent PER high of 18.2x in Mar 2021, we reiterate our TRADING BUY call on CPF.    

CTI’s operations anticipated to turn around in 2H22

Given that the Chinese pork price has bounced from CNY16.97/kg on Jun 21 to CNY23.25/kg on Sep 13, we expect that CTI (CPF’s 26.7%-stake Chinese pork affiliate) is likely to start delivering some black ink in 3Q22 through 4Q22 assuming its Chinese pork production cost of CNY16-17/kg. We model the mean Chinese pork price of CNY22/kg in 3Q22, up 51% YoY and 43% QoQ. With its QTD mean of CNY22.18/kg (Jul 1-Sep 13), we estimate the Chinese pork profit of CNY5-6/kg in 3Q22 (against its loss of CNY1-2/kg in 2Q22) and expect CTI’s 26.7%-equity earnings to turn around from Bt1.48bn equity loss in 2Q22 to Bt3-4bn equity profit (incl. marked-to-market gain of biological assets) in 3Q22, so an obvious turnaround for CTI seen in 2H22. With the greater loosening of COVID-19 restrictions in China in 2H22 spurring meat demand, we expect the Chinese pork price to rise to CNY25-27/kg through YE22 bolstered by the year-end festivities.