CPF Targets ฿600bn of Sales in 2020, No Effect from Bird Flu Outbreak in China

Charoen Pokphand Foods Public Company Limited (CPF) showed the confidence that the sales of 2020 will remain upbeat its target at 600 billion baht. No need to concern over the spread of H5N1 bird flu in Shaoyang city, China, believed Chinese Government is able to control the outbreak as soon.   

Prasit Boondoungprasert, chief executive of CPF, said that the current outbreak of H5N1 bird flu in Shaoyang, Hunan province, will not affect to CPF’s chicken business sector in China due to the contribution about 2% of total sales.

He stated that the Chinese Authorities has been experiencing the bird flu epidemic more than 10 years; therefore the Government has an effective measure to deal and prevent the outbreak.

In case of chicken meat export, Mr.Prasit pointed out that the opportunities of exportation to China remain huge as the demand rate continues to grow. In 2019, Thailand has exported 70,000 tons of chicken meat to China and estimated to increase to 150,000 tons in this year as the Chinese Government will give more license to Thai chicken processing factories.

China is now focusing on improving its food industry sector following the outbreak and to ensure the food security of all citizens.

Mr.Prasit as well mentioned to the pork sector as the overall business is in a positive tendency with the high stable price, especially in Vietnam, Cambodia, Laos and Thailand and this is one of an important factor to drive CPF growth to reach to the sales point target.

KTB Securities (Thailand) Public Company Limited (KTBST) forecasted that CPF’s share price on 3 February 2020 dropped sharply 6.67% because of the concern over the spread of H5N1 bird flu in China. According to the reported news, 4,500 of 7,850 chickens had died on a farm where the outbreak occurred while the Government culled about 18,000 chickens to contain the spread of bird flu even there was no infection case reported.

CPF’s share price will likely remain under pressure from the negative sentiment in the short term. However KTBST did not expect a significant impact on CPF’s fundamentals as the belief of CPF’s China-based broiler farm will be free from the H5N1 outbreak and CPF will become the prime beneficiary of broiler supply shortage in China. Similarly, CPF’s Vietnam-based swine farm was free from the outbreak of African Swine Fever and later enjoyed a continued increase in swine price in Vietnam due to supply shortage. Note that revenue from China-based broiler farm and feed meal plant normally accounts for 24% of CPF’s total revenue.

Expected that 4Q19E core profit to grow +93% YoY, +12% QoQ to Bt3.2bn compared to the same period of the year before.

KTBST recommended to “BUY” the CPF’s share at target price of Bt35.00 as the share price currently trades at a discount of 2020E PER of 12.0x, which is -0.75 SD below 5-yr average level. KTBST believed CPF will be the prime beneficiary of the H5N1 outbreak in China and Vietnamese swine price will likely remain at a high level in the long term.

Yesterday (4 February) the share price of CPF closed at Bt29.50/share increased Bt1.50/share or 5.36% hit the lowest point at Bt28.00 with the total trading value of Bt1,520 million.