Pork

China’s National Bureau of Statistics announced an increase of pork prices by 25.5% in September due to African Swine Fever (ASF) that infected Chinese swine since last year. Still, the increase in September was the slowest pace in the last 12 months. Nevertheless, a shortage of meat products remained a major problem for the Chinese. In the first three quarters of 2020, the imports of pork in China was more than double from a year ago. Meanwhile, China’s consumer price index rose 1.7% in September, compared to the same period of last year. Asia Wealth Securities (AWS) has given a “BUY” recommendation on CPF with a target price of ฿43.00/share. AWS expected that the earnings in 3Q20 will grow 8% YoY and 9% QoQ because of the pork price in the region stabilized at a high level. AWS expected CPF’s revenue to grow 11% YoY and 2% QoQ on the back of higher QoQ sales volume, as well as growing shrimp business in Thailand after a more domestic focus. Meanwhile, AWS also expected a gross profit margin of 3Q20 at 18.5%, higher than 2Q20 at 18.1%. Also, the feed costs increased, expected to not affect because the futures price has been locked up to the beginning of 2021 and expected that the feed cost in 2020 will be cheaper than in 2019. KGI Securities has given an “Outperform” rating on CPF with a target price of ฿38.00/share. KGI expected CPF to post a 3Q20 core profit of Bt5.8bn (+108.0% YoY, +6.1% QoQ), driven by improved GPM and revised up its 2020F core earnings estimates by 17.5%, largely to take into account higher swine prices in Vietnam and Thailand. Meanwhile, KGI revised down its earnings forecasts for 2021-2022 to factor in higher animal feed prices. The security company stated that it has not yet included contribution from two ongoing M&A deals in our forecast. KGI believed that recent price correction has been overdone and fully priced in potential increase in animal feed prices.