May 13, 2009
Thailand's Charoen Pokphand Foods expects good Q1 net profit
CPF's 1Q09 net profit is expected to grow 39 percent on-year and 106 percent on-quarter to BT629 million due to strong product prices, and softer raw material prices on-quarter.
These should result in higher gross margin of 13.3 percent (from 12.8 percent in 4Q08 and 12.1 percent in 1Q08). Moreover, SGA expenses should be under control as sales is estimated at 10.8 percent for 1Q09, an improvement over 11.3 percent in 4Q08 and 11.2 percent in 1Q08.
For the rest of 2009, major product prices (swine, broiler, egg, and shrimp) are expected to remain strong like in 1Q09. This would be supported by (i) supply cuts (pork and shrimp) last year, (ii) start of export season for the year. Coupled with lower raw material prices, official says CPF's gross margins improving on-year.
FY09F and FY10F earnings were raised to reflect better SGA control and gross margins. Target price of Bt4.55 is maintained, pegged to 0.7x FY09F P/BV. CPF's share price rallied for two weeks recently after being a laggard in the sector. The stock now offers 21 percent upside to target price, and 5.3 percent dividend yield for 2009.