印尼家禽：是时候退缩了

1、29March2019IndonesiaEQUITIESInside HYPERLINK l _bookmark0 Time tochickenout2 HYPERLINK l _bookmark1 Broiler prices on amajordownswing3 HYPERLINK l _bookmark2 Limited upside for DOC expect lower prices HYPERLINK l _bookmark2 from2H19 HYPERLINK l _bookmark3 Valuationcomps11 HYPERLINK l _TOC_250001 Cha

2、roen Pokphand Indonesia(CPINIJ)13 HYPERLINK l _TOC_250000 Japfa Comfeed Indonesia(JPFAIJ)23Poultry companies revenue breakdown (2018)Indonesia PoultryTime to chicken outKey pointsKey points Initiating with a cautious view - wait for a better entry point and better clarity on Indonesian poultry. We s

3、ee a low margin of relative safety. Key risks: broiler prices fall further (-15% YoY) in 1Q19E, DOC prices trend lower in 2H19. Expect much lower incremental growth rate in FY19. We are initiating coverage of CPIN, with an Underperform rating, and of JPFA with a Neutral (all 19 consensus ratings are

4、 buys).We initiate coverage of the Indonesia poultry sector with a negative view; we have an UP rating on Charoen Pokphand Indonesia (CPIN) and a N on Japfa Comfeed Indonesia (JPFA). We believe current valuations are baking in the100%3%15%8%2%19%continuation of the strong FY18 performances, and prov

5、iding a low margin of80%60%40%20%29%11%48%CPINFeed36% JPFADOC21%58%MAINrelative safety (CPINs PE is at +3 std dev), as we believe the following key risks will materialise: 1) a continuation of the lower broiler prices seen in 1Q19 (-14% YoY); and 2) less upside from the current day-old-chicks (DOC)

6、price. We believe both these issues will likely materially limit the outlook for FY19 growth.Broiler prices on a major downswingBroilers contributed 73% and 40%, respectively, of the FY18 incremental EBITLivebird/BroilerProcessed foodSource: Company data, Macquarie Research, March 2019Peers CompsTic

7、ker RatingPrice (lcy)TP(lcy)PE(x)P/BV(x)CPINUP7150520028.05.6JPFAN195020009.01.9MAIN* NR1600n.a14.91.7*Non rated, used Bloomberg consensus forecast, prices as of 28 March 2019Source: Bloomberg, Macquarie Research, March 2019AnalystsPT Macquarie Sekuritas Indonesia HYPERLINK /directory/people/details

8、?analystId=5283 Richardo Walujo +62 21 2598 8369 HYPERLINK mailto:richardo.walujo richardo.walujogrowth for CPIN and JPFA. The 1Q19 broiler price is tracking 15% lower than the 1Q18 price, indicating weaker demand and higher supply. In contrast to the 16% YoY rise in FY18, we expect broiler prices t

9、o decline 6% YoY in FY19. We believe broilers will not contribute to CPINs FY19 EBIT (barely breaking even) while their contribution to JPFAs EBIT will fall by 75%. Broilers revenue contribution has grown over the last three years for both CPIN (from 0% in 2014, to 29% in 2018) and JPFA (34% to 40%)

10、, due to losses at non-integrated broiler farmers over the last five years (except 2018). These losses reduced the proportion of independent farmers to total broiler farmers to less than 20% in 2018. Hence, the integrated players have had to grow broilers and work with more contract farmers, providi

11、ng them buyback guarantees. Broiler prices can be very volatile, adding to the volatility of the business.Limited upside from DOC; prices to fall from 2H19DOC was the second major contributor to incremental FY18 EBIT growth for CPIN and JPFA at 30% and 45%, respectively. We expect the DOC price to f

12、all 3% YoY in FY19 vs the 34% surge in FY18. The poultry breeding companies association in Indonesia (GPPU) has announced that imports for the 2018 grandparent stock (GPS) came in at 707k (+9% YoY), and it expects 2019 imports to grow 5-6%. This would translate to higher supply of DOC in one year. C

13、PIN and JPFA, both DOC breeders, enjoyed a strong DOC price in FY18 due to a three-year consecutive decline in GPS imports, from a peak of 725k in 2014 to 650k in 2017. This year will be the first to see higher DOC supply, after three years of consecutive decline; hence, the strong prices may not la

14、st.Time to chicken outWe expect FY19 NPAT to fall 8% YoY for CPIN, but rise 9% YoY for JPFA due to no FX losses and lower tax. Our NPAT forecasts for CPIN/JPFA are -13%/-13% lower than consensus. We expect CPINs valuation to de-rate from the current +3 std dev, although JPFA might see some overhang

15、on its rerating prospects due to weaker industry profitability and as its major shareholder is trying to reduce its stake in the company.Please refer to page HYPERLINK l _bookmark10 34 for important disclosures and analyst certification, or on our website HYPERLINK /research/disclosures /research/di

16、sclosures.Time to chicken outWe initiate coverage of the Indonesia poultry sector with a cautious view, with preference to Japfa Comfeed (JPFA IJ, Neutral, TP: Rp2000) than Charoen Pokphand (CPIN IJ, Underperform, TP: Rp5200). We think current valuation provides low margin of safety and has not take

17、n into account these risks:Downside swing from broiler prices. Strong EBIT growth in 2018 was mainly driven by rising broiler prices (+16% YoY). However, the broiler price trend observed in 1Q19 declined by 15% YoY, indicating a weak demand and higher supply. If the trend continues, this could be a

18、major downside swing to earnings, as broiler was the main growth contributor in FY18 EBIT for JPFA and CPIN.Limited upside on DOC prices, trending lower in 2H19 onward. The impact from higher GPS import quota in 2018 (+8.7% YoY) should be felt this year. This would limit a further DOC priceincrease.

19、Weevenproject a3%/5%declineinthepricesfor19e/20e,from astrongsurge of +34% inFY18.Fig 1 Recommendation and TP for Indonesia poultryMarket capCurrent priceTicker(US$bn)(local ccy) TP (localccy)12-mth TSRCPINCharoen Pokphand8.8UP71505200-26%JPFAJapfa Comfeed1.98N195020006.4%Source: FactSet, Macquarie

20、Research, March 2019Our TP for CPIN implies 2020E PE of 20 x, 3.6x PBV with an 18% ROE, while our JPFA TP implies 12x PE, 1.81x PBV, with an 18% ROE. CPIN is currently trading at 2020E PE of 29x and PBV of 5.3x, this level of valuation is at its+3 of its standard deviation. The current share price l

21、evel is valuing peak earnings at a historical peak multiple. JPFA is currently trading at 2020E PE of 10 x and PBV of 1.8x, which is in line with the average PE valuation if we strip out the valuation distortion in 2015 (PE spiked was not due to share prices, but rather massive downgrade on earnings

22、 estimates after JPFA booked a big FX losses after Rupiah depreciation in2015).Fig 2 CPINPE bandFig 3 JPFA PEband30252015105Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18PEAvgstd+2 std-1 std-24035302520151050Mar-14Mar-15Mar-16Mar-17Mar-18PEAvgstd+2 std-1 std-2Source: Bloomberg, company data

23、, Macquarie Research,March2019Source: Bloomberg, company data, Macquarie Research, March2019Broiler prices on a major downswingWe have seen weaker broiler prices in 1Q, a decline by 14% YoY. At the same time, we have seen broiler contribution to the integrated poultry players (later called as “integ

24、rators”) like CPIN & JPFA, has gotten bigger year by year. This is an inevitable trend and will continue, as smaller scale broiler farmers were forced to exit the industry after they experienced several years oflosses.Fig 4 Broiler price trend 2014-1Q19 (Rp/kg). Strong increase in 2018, but starts t

25、o moderate in 1Q19Fig 5 1Q19 trend has shown -14% lower price YoY, compared to previous 1Qavg 18: Rp19,620avg 15: Rp16,800avg 18: Rp19,620avg 15: Rp16,800avg 17:Rp16,860 avg 14: Rp15,800avg 16:Rp17,100avg1Q19:Rp16,90022000200001800016000140001200010000 20,00019,00018,00017,00016,00015,00014,00013,00

26、012,00011,00010,00019,07519,075-14%+28%16,9371Q141Q151Q161Q171Q181Q19Broiler, Rp/kgSource: Pinsar, Company data, Macquarie Research,March2019Source: Pinsar, Company data, Macquarie Research, March2019The lower broiler price, we believe, is because of higher supply of chicken meat in FY19, as a resul

27、t of higher grandparent stock (GPS) import in 2018 combined with weaker 1Q19 demand.We estimate an increase of 10% chicken meat production (3.5m ton) in FY18. We arrived to this number by assuming: 1 GPS to produce 40 parent stock (PS), each PS to produce 130 final stock (FS).Mortality/depletion rat

28、e of around 5% for integrators, 10% for small scale farmers. Each broiler final stock produces a net 1.1kg/chicken.Fig 6 We estimate broiler meat supply to start increasing in 2019 by 10% YoY, after three- year consecutive declines (2015-18)-201320142015201620172018Meat production(000ton)GPS import

29、quota (000 bird),RHS7603,2793,4983,2793,4983,3763,4993,2553,1832,896720700680660640620600Source: GPPU, Macquarie Research, March 2019Broiler was a major contributor. 73%/40% of CPIN/JPFA incremental EBIT growth in FY18 came from this division. Broiler represented 16% of CPIN and 26% of JPFA EBIT in

30、FY18, and we expect this to be drastically lower in 19e/20e.Fig 7 Broiler EBIT growth to Total CPIN EBIT growth in FY18Fig 8 Broiler EBIT growth to Total JPFA EBIT growth in FY182,017Rpbn2,0177,0001337,00013347 6,4686,0005,0008204,0003,719(268)3,0002,00073% of Ebit growth in FY181,00005000Rpbn(151 )

31、3,844791(151 )3,8447912632,24943% of Ebit growth in FY18 692692FeedDOCBroilerOthersJPFA EbitFY18Source: Company data, Macquarie Research,March2019Source: Company data, Macquarie Research, March2019:As most of the growth in broiler division was driven by broiler prices, it can be quickly reversed whe

32、n the price retreats. In FY18, the broiler price registered a 16% increase YoY to Rp19620/kg, from Rp16,860/kg in FY17, while the 1Q19 price has declined by 14% YoY.Govt, through Agriculture minister, has instructed for production culling by 10% from 21 Mar to 8 Apr 2019, to address current weak bro

33、iler prices. It may improve the price. However with a current run rate of -14% lower price YoY, we need to see 18% higher prices in Apr-Dec19, just to see the average selling price in FY19 flat YoY (hence high growth in FY19 is unlikely).We assume a 6% lower broiler price for FY19. This is the reaso

34、n why we expect much lower contribution from the broiler business to CPIN and JPFA EBIT in FY19, as seen in Figs 9 and10.Fig 9 Broiler contributed 16% of CPIN total EBITinFY18Fig 10 Broiler contributed 26% of JPFA total EBIT inFY181,5001,0000(500)16%16%-3%-2%-1%0% -27%26%22%26%22%13%10%11%11%5%6%-3%

35、BroilerEbit,RpbnBroiler Ebit % to total Ebit,20%15%10%5%0%-5%-15%-20%-25%-30%8002000(200)1213141516171819e20eBroilerEbit,RpbnBroiler Ebit % to total Ebit,30%25%20%15%10%5%0%-5%Source: Company data, Macquarie Research,March2019Source: Company data, Macquarie Research, March2019This is an inevitable t

36、rend and will continue, in our view. We expect broiler to remain a big part of revenue (27% for CPIN, 39% for JPFA in 19e) and the size will grow. The reason is more independent farmers exiting the industry due to unfavourable prices. This shifts the up/downside risk of broiler prices to the integra

37、tors.Fig 11 Broiler represented 29% of CPIN FY18 revenue. 19e/20e contribution looks lower as we expect lower prices YoY, while volume to grow by 6%Fig 12 Broiler represented 40% of JPFA FY18 revenue. 19e/20e contribution looks lower as we expect lower prices YoY, while volume to grow by 8%18,00016,

38、00014,00012,00010,00001213141516171819e35%29% 29%29% 29%27%16%25%20%15%10%5%0%14,00012,00010,00001213141516171819e45%41%38%41%38%40%41%40%39% 39%34%30%35%30%25%20%15%10%5%0%Broiler revenue,RpbnBroiler revenue % tototalrevenueBroiler revenue,RpbnBroiler revenue % to total revenueSource: Company data,

39、 Macquarie Research,March2019Source: Company data, Macquarie Research, March2019:The number of independent/small scale chicken farmers has greatly reduced to 170k in 2016, from 2m in 2000. Independent farmers used to represent 80% of the industry, while 20% from integrators. Now, its the other way a

40、round. We think the proportion of independent farmers is even less than 20% now, based on our discussion with industry players.One of the main cause is the persistent losses in broiler farming over the last four years (except for 2018), with the worse period in 2015-17 (Fig 13). These losses are the

41、 reason why they are converting into contract/plasma farmers to work with the integrators. DOC and feed supply from the integrators. Another incentive for these farmers as corn supply became limited due to the corn import ban. The farmers will also receive some kind of trainings through the integrat

42、ors foundation, in some case also receive funding for working capital. The integrators provide a guarantee to buyback the broiler when it reaches certain body weight. Farmers receive some kind of fixed margin (or profit sharing scheme) depending on their performance chicken body weight, feed convers

43、ion ratio, depletion rate.Fig 13 Our estimate of farmers break-even pointRp/kg 22,00020,00018,00016,00014,00012,00010,0008,0001Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q19independent farmerintegrated poultry farmer (with feed & DOC margin)market price at farm gateSource: PINSA

44、R, Company data, Macquarie Research, March 2019The integrators have a much efficient cost structure higher feed conversion ratio (better feed formula and rationing) and lower mortality rate (use bio security, controlled environment in breeding the chicken). Our calculation above is assuming: Indepen

45、dent farmer use DOC and feed at a market price, a feed conversion ratio (FCR) of 1.8x, and a depletion rate of 10%. Integrated poultry farmer (with feed & DOC margin) use DOC and feed at market price, FCR 1.6x, and a depletion rate of 5%. This is the COGS estimate of the integrators (CPIN JPFA) broi

46、ler division.Fig 14 Quarterly average price of farmersbreak-even point20152016201720181Q19independent farmer16,52717,60418,22519,15519,769integrated poultry farmer (with feed & DOC margin)14,69115,66816,26017,08117,182market price at farm gate16,85317,11816,86819,62716,937Source: PINSAR, Company dat

47、a, Macquarie Research, March 2019Despite the size, these integrators are still price takers in the broiler business.Vast majority of chicken purchases in Indonesia are still in the form of live chicken in wet markets, instead of frozen or a processed form in modern retail. Therefore, the poultry far

48、mers rely on wholesaler to purchase and deliver the chicken to the thousands of wet markets. This is different from the more developed poultry industry such as in the US and Brazil where the integrators can deal with several big modern retail chains, and have more bargaining power over the price.The

49、 wholesalers can generally gauge what is the supply level of chicken available at the farm, and what is the demand level currently, then offer a “market” price to the farmers.The local consumers prefer live chicken that is not oversized (range between 1kg-1.3kg). Price for “oversized” chicken (1.6kg

50、) is generally lower by around 5%-10% than the chicken with lower weight, with common perception that these chicken must have been injected with some kind of growth hormone. Therefore, It would be risky for farmer to hold back chicken inventory instead of sell those at the “market” price offered, as

51、 that action incurs more feed cost and consequences of selling the chicken few days after at a lower price per/kg.Fig 15 Local consumers prefer chicken with body weight of 1kg to 1.3kgchicken weight1.8Rp/kg19,50019,00018,50018,00017,70017,500Source: ABORGE (West Java price, 14 Mar19), Macquarie Rese

52、arch, March 2019Limited upside for DOC expect lower prices from 2H19The day old chick (DOC) breeders, CPIN, JPFA and MAIN, have enjoyed strong DOC prices in 2016-18 due to a decline in GPS import quota, from a peak of 725k in 2014 to 650k in 2017. The poultry breeding companies association in Indone

53、sia (GPPU) has announced that the imports for the 2018 GPS came in at 707k (+9% YoY), and it expects 2019 imports to grow by another 5%- 6%. See Fig. 17Fig 16 GPS import quota. Started to grow in 2018, expectedto add supplyin 2019Fig 17 Day old chickprice800750700650600550500201320142015201620172018

54、GPS import quota (000 bird)growth14%74272574272570070767565065010%8%6%4%2%0%-2%-4%-6%0 DOC, Rp/birdSource: GPPU, Macquarie Research,March2019Source: Company data, Macquarie Research, March 2019:This would translate to a higher supply of DOC within one year at the earliest (Fig. 19) to see the timeli

55、ne. Therefore we think the DOC price would have less catalysts to move higher vs 2018 when GPS import had declined for the third consecutive year. We expect DOC prices to decline by 3% in FY19, followed by a further decline by 5% in FY20e.Fig 18 The impact from higher GPS import could be felt as soo

56、n as 56 weeks (13 months) afterSource: Company data, Macquarie Research, March 2019We are aware that the import timing and how the breeders strategy in utilizing the import quota also are important determinant. Our base case is that the integrated poultry will be more careful in utilizing the import

57、 quota to keep profit intact, and not to repeat the oversupply situation in 2014-15.But from our last discussion with the integrators, we sense that the integrators are also worried that if the farmers are not profitable (weak broiler prices or increasing cost input), then increasing Feed and DOC pr

58、ices further would be difficult.Fig 19 DOC production processSource: Company data, Macquarie Research, March 2019Fig 20 DOC contributed 22% of CPIN total EBITin FY18Fig 21 DOC contributed 35% of JPFA total EBIT inFY182,0001,5001,0005000(500)1213141516171819eDOC Ebit,Rp bnDOC Ebit % to totalEbit30%22

59、% 22%22% 22%18%15%16%16%8%-13%-25%10%0%-10%-20%-30%1,6001,4001,2001,0006000(200)(400)(600)1213141516171819eDOC Ebit,Rp bnDOC Ebit % to totalEbit40%35% 34%35% 34%31%25%22%24%8%-7%-27%20%10%0%-10%-20%-30%-40%Source: Company data, Macquarie Research,March2019Source: Company data, Macquarie Research, Ma

60、rch 2019:Fig 22 DOC contributed 30% of CPIN EBIT growthin FY18Fig 23 DOC contributed 50% of JPFA EBIT growth inFY18Rpbn 8208204,5007,0002,0177,0002,017133476,4686,0005,0004,0003,719(268)3,0002,00030% ofEbitgrowth in1,000FY1803,5003,0002,5002,0001,5001,000Rpbn791791692(151 )692(151 )26350% of Ebit gr