Equity Analysis /
Thailand

Charoen Pokphand Foods: Value accretion from China pork now factored in

  • Recent regionwide pig price surge constitutes a positive surprise

  • Worst-case negative impact of 5% from SBM price jump

  • Net value accretion from China’s pork deal now factored in

Bualuang Securities
18 January 2021

We have now factored China’s pork deal into our model, prompting us to upgrade our earnings and target price. We view it as a long-term value accretion. The recent surge in regionwide pig prices is a positive surprise, which will introduce scope for an upside to our current pork pricing assumptions for 2021 if they can sustain at high levels through 1H21. We reiterate a BUY on CPF, premised on its solid 2021 core profit rise and a cheap valuation.  

Recent regionwide pig price surge constitutes a positive surprise  

The recent surge of live pig prices in China, Vietnam and Thailand during Dec 2020 through Jan-to-date is above the firm’s and our own expectations of a YoY stable or slight decline in regionwide pig prices in 2021. It is attributed to the tighter regional supply caused by colder-than-usual weather, the resurgence of PRRS and ASF diseases and the high seasonal demand during New Year festivities and in anticipation of the Chinese and Vietnamese New Year Festivals on Feb 12. The YTD mean prices for China, Vietnam and Thailand were CNY36/kg, VND78,448/kg and Bt79/kg, respectively. If they can sustain at this high level in Jan through 1H21, there will be scope for an upside to our current pork pricing assumptions for 2021—CNY30/kg (down 14% YoY), VND68,000/kg (down 9% YoY) and Bt72/kg (down 3% YoY).