Preview 4Q24F: Expect YoY growth
We expect 4Q24F core profit at Bt4bn, up from a core loss of Bt8bn in 4Q23 on a better margin, higher equity income and lower interest expenses, but down 40% QoQ from seasonality. With livestock prices in Thailand and key countries rising YTD amid lower feed costs, we expect a rise both YoY and QoQ in 1Q25F core earnings. We maintain Outperform with a mid-2025 SOTP TP of Bt28: Bt3 for CPF itself (6-9x PE for feed, farm and food units) and Bt25 for CPALL and CPAXT.
Expect 4Q24F net profit of Bt4bn vs net loss of Bt1.8bn in 4Q23 (-45% QoQ). Without extra items, we estimate a 4Q24F core profit of Bt4bn vs a core loss of Bt8bn in 4Q23 (down 40% QoQ on seasonality). Behind the YoY growth is: 1) better margin from better local swine and broiler prices (+10% YoY and +1% YoY), higher swine prices in Vietnam (+30% YoY) and improved broiler operations in China (after CPP HK sold 30% of the loss-making chicken farm capacity in 4Q23); 2) higher equity income from CTI (better China swine prices, +11% YoY, and the sale of 20% of the huge loss-making swine farm capacity in 4Q23), and from CPALL and CPAXT; 3) lower interest expenses from lower cost of debt, notably overseas.
2025F operations: Better product prices, low feed costs. Local livestock operations. In Jan to date, local swine price is up to Bt75/kg (+4% MoM, +10% YoY) and local broiler price has also risen to Bt41.5/kg (+5% MoM, +5% YoY), above breakeven at the gross profit level of Bt65/kg and Bt37.5/kg, on better demand ahead of Chinese New Year. In 2025F, CPF expects local swine prices to improve YoY on better supply management and for local broiler prices to edge up YoY from balanced demand and supply. CPF targets raising its 2025F local swine and broiler capacity by 7% YoY and 5% YoY. Feed costs. CPF keeps a 3-4-month feed inventory; thus, it will realize lower actual feed costs in 1Q25F after a drop in 4Q24 in spot corn and imported soybean meal prices to a 3-year low of Bt10/kg (-4% YoY, -17% QoQ) and Bt19/kg (-16% YoY, -8% QoQ). In 2025F, it expects feed costs to fall in the mid single digits YoY from good global crop weather. Overseas operations. In Jan to date, swine price in Vietnam is up to VND64,000/kg (+27% MoM and +3% YoY, vs breakeven at the gross profit level at VND42,500/kg) from better demand ahead of Chinese New Year and lower supply as ASF began spreading again in 3Q24 to early 4Q24F; swine price in China is CNY15.7/kg, flat MoM but +9% YoY, vs breakeven at the gross profit level at CNY15/kg. In 2025F, CPF expects swine prices in Vietnam to be at least stable or improve YoY from tighter supply (6-12 months after ASF spread), while fragile demand may inch swine price in China down YoY. In 2025 it plans to raise swine capacity in Vietnam by 67% and in China by over 10%. It also believes losses overseas will be lower YoY: 1) US operations (Bellesio) will launch more new product categories i.e. the Thai cube box (successfully launched in Europe) and 2) a higher feed and food sales proportion in India, with lower live chicken sales to reduce dependence on the volatile farm business. Earnings sensitivity. We estimate earnings downside from the rise in local minimum wage (37% of its operations in Thailand) from Jan 1, at 2% as its labor costs account for 5-6% of total costs and its key factories are located in provinces where the rise is low to medium: Nakhon Ratchasima and Saraburi (+2.5% wage rise) and Samut Prakan (+5% wage rise). We expect neutral earnings impact from a strong THB as its US$-denominated broiler exports balance imports of US$-denominated feed.
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).
