Given the anticipated bottom-line turnaround for CTI and CPP, led by a recovery of Chinese and Vietnamese pork prices, and higher equity profits from CPALL and MAKRO in 2023, CPF’s 2023 core profit is on track to expand further. And its valuation is very cheap now.
Expected bottom-line turnarounds for CPP and CTI in 2023
China’s live pig price has recently dropped by 31% (from its recent high of CNY28.18/kg on Oct 19, 2022, to CNY19.34/kg on Dec 16), thanks to China’s stricter zero-COVID policy since Sep 2022. Despite some relaxing of its COVID policy in Dec such as easing of restrictions in public places, the Chinese pork price has been on the decline because Chinese people still have concerns over the widening COVID-19 spread and higher numbers of infections. We think that this is a short-term negative because the anticipated lifting of COVID-19 restrictions and measures will boost the Chinese tourism sector in 2023. Meanwhile, Vietnam’s mean live pig price (three regions) has fallen by 25% (from its recent high of VND69,833/kg on Jul 27, 2022, to VND52,333/kg on Dec 16), led by the resurgence of an African Swine Fever (ASF) outbreak during Nov-Dec, prompting supply dumping.