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Charoen Pokphand Foods Pcl (SET:CPF), 49.98% stake owned by CPG Group as of March 15, 2016, is a Thailand-based conglomerate engaged in the operation of agro-industrial and integrated food businesses. The company operates in both the livestock (swine, broilers, layers, and ducks) and aquaculture (shrimp and fish) businesses.
The vertically integrated businesses incorporate the manufacturing of animal feed, animal breeding and animal farming, meat processing, the manufacturing of semi-cooked meat and fully-cooked meat, food products and ready meal products, as well as meat and food retailer and restaurant businesses.
Charoen Pokphand Foods said on May 12, 2016 that its first-quarter 2016 revenues were 105.51 billion baht, beating the 104.92 billion baht consensus estimate of 6 analysts, according to the Financial Times. CPF posted first-quarter 2016 earnings of 0.51 baht per share, exceeding the 0.3 baht per share consensus estimate of 6 analysts. The next earnings announcement is expected on August 9, 2016.
For 2015, the company reported a dividend of 0.75 baht per share, a 25.0% increase from 2014. The 18 analysts covering the company expect dividends of 0.79 baht per share for the upcoming fiscal year, representing a year-over-year increase of 4.9%.
According to Barron’s, analysts are betting that CPF will benefit from rising pork prices due to a shortage of swine in China and a rebound in the shrimp business after the early mortality syndrome (EMS) hit in 2013-2015. Major challenges for CPF could be pricing pressure on CPF’s chicken business, as oversupply continues and the announcement by the Chinese government to the cut meat consumption.
The Chinese government has outlined a plan to reduce its citizens’ meat consumption by 50%, in a move that could reduce greenhouse gas emissions by 1 billion tons by 2030, and lessen the country’s problems with obesity and diabetes, according to The Guardian.
The company said it plans to invest 50 billion baht over the next five years to boost its annual revenue to 700 billion baht by 2020. This month, CPF acquired a 30% stake in China’s Banner Infant Dairy Products Co. Ltd, manufacturer of formulated infant milk powder, and a 12% interest in Qingdao Yi Bang, manufacturer and seller of animal vaccines, for 4.4 billion baht.
From our technical viewpoint, CPF has been range-bound between the 22 baht and 32 baht levels since 2010. The stock broke down in July 2015 and hit a multi-year low of 16.40 baht in December 2015. The stock has bounced about 70% from the December 2015 low and is now consolidating at the 28 baht level.
According to the Financial Times, the company is expecting a full-year 2016 EPS of 1.51 baht, up 183% year-on-year, on revenues of 461.6 billion baht, up 9.74% year-on-year, so there are high expectations. Investors should beware though, as strong earnings could already be priced in the stock. The consensus amongst 20 polled investment analysts covering CPF gave the company an OUTPERFORM rating, with the median 12-month price target of 31.50 baht a share, as of July 12, 2016.
Disclosure: No position and no recommendation. |
