CPF - 3Q24: Core profit in-line with estimates

3Q24 core profit was in line at Bt6.6bn, surging from core profit of Bt3.5bn in 3Q23 and up 15% QoQ. We expect 4Q24F core profit to rise YoY from a wider margin on high local and overseas livestock prices amid low feed costs, but fall QoQ on seasonality. CPF expects benefit from lower feed costs to continue from 4Q24F to at least 1H25F. We maintain Outperform with a mid-2025 SOTP TP of Bt29: Bt3 for CPF itself (6-10x PE for feed, farm and food units) and Bt26 for CPALL and CPAXT.

3Q24 net profit of Bt7.3bn, turning from net loss of Bt1.8bn in 3Q23 and +6% QoQ, above estimates of Bt6.3-6.8bn off Bt669mn extra gains (gains from change in biological assets in Thailand and Vietnam). 3Q24 core profit was in line at Bt6.6bn, surging from core profit of Bt3.5bn in 3Q23 and up 15% QoQ, backed by: 1) a wider gross margin of 15.4% (from 10.8% in 3Q23), widening in all units, led by the livestock unit (+710bps YoY Thailand and +410bps YoY overseas) from higher livestock prices and better broiler exports in Thailand, higher swine prices in Vietnam and lower feed costs; 2) a rise in equity income to Bt3.7bn (vs Bt528mn in 3Q23) from CPALL & CPAXT (robust sales and margin), CTI (earnings in the black since 4Q22 from higher swine prices in China in 2Q24 and the sale of some loss-making swine farms in China in 4Q23) and Hylife (better contribution YoY after the sale of a loss-making business in the US in 3Q23); 3) lower SG&A/sales (-90bps YoY), after the sale of some loss-making chicken farms in China in 4Q23; 4) lower interest expenses (-5% YoY) from partial debt repayment and lower cost of funds from overseas operations.

Takeaway from meeting. Feed costs. CPF is more positive on the trend of feed costs, down 8-10% YoY in 2024F on average and potentially down another 3-5% YoY in 2025F from more corn and soybean meal supply in Thailand and overseas on favorable crop conditions, with potentially lower global wheat supply if the Russian-Ukraine war ends. This will further lower farm breakeven costs for big players from currently Bt65/kg and Bt37-38/kg for local live pigs and chickens, VND43,000/kg and CNY15-16/kg for live pigs in Vietnam and China.

Local livestock prices. CPF expects local swine price to edge up to Bt72-73/kg (vs Bt72/kg now and Bt69/kg YTD) in 2025F from lower supply after the widespread return of ASF brought by the flooding in Sep-Oct, lower pig production in Thailand at 19.2mn in 2025F (from 19.4mn in 2024F) and less smuggled swine meat. Local broiler price in 2025F is expected to be close to 2024F’s (Bt37-38/kg now and Bt42/kg YTD) with more chicken production and continued robust import demand in the EU, UK and Japan.

Overseas swine prices. CPF expects 2025F swine price in Vietnam to be above VND60,000/kg (vs VND61,500/kg now and VND59,000/kg YTD) upon a supply shortage after the widespread return of ASF from flooding in Sep-Oct. Swine price in China in 2025F is estimated at CNY15/kg (vs 16.5/kg now and 16.8/kg YTD) on more supply amid moderate demand, but to remain profitable from lower feed costs.

Other overseas. In 2025F, it expects losses from overseas to be lower YoY: 1) US operations (Bellesio) will launch more new product categories i.e. Thai cube box (successfully launched in Europe); 2) India livestock operations from an increase in feed and food sales proportion, with lower live chicken sales to reduce dependence on the volatile farm business.

Investment. CPF will still focus on core operations and assets, staying conservative on new investment.

Key risks: Weak prices from fragile purchasing power and more supply, high feed costs, strong THB. Key ESG risks are GHG emission, waste & water management (E), customer welfare, product quality management, health & safety policies (S)