Charoen Pokphand Foods: Healthy meat prices; juicy profit
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- Domestic swine price continues to improve while Vietnamese swine price remains healthy QTD
- Further upsides from recovery of Thai broiler prices following firmer export demands and prolonged soybean meal price downtrend
- 2Q25F core profit to remain firm from 1Q25 and show robust growth y/y
- Maintain BUY with an unchanged TP of THB31.50
Update on meat prices in key markets
Domestic swine prices rising. In 1Q25, Thai swine price was THB79.4/kg. Since then, prices have increased further and now hover at THB87.5/kg with an average price QTD of THB87.3 (+30% vs. 2Q24 and +10% vs. 1Q25). The rise in domestic swine was supported by supply stabilisation following the pork smuggling situation easing and the resurgence of ASF in the region. We note that the market’s production costs of swine are THB65-66/kg. Whereas CPF’s production costs are 10-15% lower than the market.
Thai broiler prices stable in a profitable range. In 1Q25, the Thai broiler price stood at THB40.3/kg. QTD, it was THB40.3/g on average, flattish from 1Q25 but an 8% drop from 2Q24. Domestic broiler price declined y/y due to lower raw material costs. Nonetheless, the market’s broiler production cost is THB36-37/kg; thus, the company is still profitable on Thailand’s broiler operations.
In addition, over the short- to medium-term, we believe there is an upside on Thai broiler prices to improve after stronger export demands following an outbreak of bird flu in Brazil, the key exporter to the global market. Nonetheless, we note that CPF would enjoy a potential increase in domestic broiler prices but may have insignificant benefits from an increase in export sales (across all products) as they only accounted for 6% of CPF’s total sales.
Swine prices rising in Vietnam but normalising in China. In 1Q25, the Vietnamese swine price was VND65k/kg. Currently it has risen to VND68k/kg, improved 4% vs. 1Q25 and 9% vs. 2Q24. The improvement was driven by lower supply due to the worsening of the ASF outbreak in Vietnam. We note that the market’s production costs are VND43-44k/kg. Thus, we believe Vietnam operations should continue to be a key performance driver throughout 2025.
Chinese swine price under recovery. Chinese swine price in 1Q25 was RMB16/kg and has since dropped slightly to RMB15/kg at present, no thanks to a negative impact by higher supply from capacity expansion of big players in the region. The current price is slightly below market production costs of RMB15.5/kg.
Key raw material costs remained favourable
Corn price inched up, but soybean meal prices remained favourable. In 1Q25, domestic corn price increased 9% y/y and 5% q/q, whereas soybean meal price declined 26% y/y and 11% q/q. The fluctuation in corn prices was mainly due to seasonality, while the downtrend in soybean meal prices was supported by the easing of the Russia-Ukraine war. As of now, we observe that corn prices are mostly stable since 1Q25, while soybean meal prices decreased 2% since then.
The US reciprocal tariff impact has been limited so far, but benefits may lie in lower raw material costs imported from the US. Currently, CPF exports products worth c.USD200mn to the US market, which are subject to a 10% additional tariff. However, CPF sees potential for cost savings by possibly importing some raw materials – i.e., corn and soybean meal.
Currently, Thailand imports c.30% of corn used for the domestic livestock farming business. This is mainly imported from Myanmar (>80%) and Laos. The imported corn is subject to 0% under AFTA, with the average price ranging from THB8.92-10.39/kg in 2024 according to the Customs Department.
Average corn prices in the US were THB6.32/kg in 2024 as per USDA data. Nonetheless, the import of US corn is subject to a 20% tariff and higher logic costs, which made US imports less competitive. The Thai government has reduced the 20% tariff after trade negotiations with the US. This might benefit CPF on potentially lower production costs.
Meanwhile, soybean meal was mostly imported from Brazil (almost 90%) while c.7% was imported from the US at a less competitive price. Nonetheless, we see a persisting downtrend of soybean meal in the global market amid trade tension between the US and China, as China is the biggest importer of US soybean meal and accounted for 52% of US soybean exports. With intensifying trade tension, this should continue to pressure soybean meal price globally and benefit CPF.
Currently, we note that according to CPF management, corn and soybean meals comprise c.50-55% and 20% of raw material costs (c.60% of farming COGS), respectively. Per our calculations, every 10% decrease in corn and soybean meal prices could bring 7% and 3% earnings upsides in FY25F (annualised impact).
Outlook
Good momentum to continue in 2Q25. According to the uptick in meat prices in key markets, we believe earnings in 2Q25F should stay at a similar level to 1Q25, largely supported by expanding gross margin. Nonetheless, management believes new supplies may enter the market in 2H25, leading to meat prices normalising from 1H25. Still, meat prices should remain elevated and increase on a y/y basis. Meanwhile, CPF would continue to focus on enhancing production efficiency, which should sustain cost savings.
Recommendation
Reiterate BUY with an unchanged TP of THB31.50. We maintain our FY25-26F earnings as the outlook is still on track with our expectation. Our current TP is pegged to a 0.99x FY25F P/BV (+1.5SD of its previous five-year average P/BV) from 0.9x, reflecting the prolonged uptrend in meat prices and favourable raw material costs. We maintain BUY due to upsides and strong earnings expected in FY25F.
FY Dec (THBmn) | 1Q24 | 2Q24 | 3Q24 | 4Q24 | 1Q25 | Chg. y/y | Chg. q/q |
Sales | 140,037 | 149,498 | 142,703 | 148,509 | 144,175 | 3% | -3% |
Cost of Goods Sold | -123,228 | -126,484 | -120,756 | -125,236 | -117,508 | -5% | -6% |
Gross Profit | 16,809 | 23,013 | 21,947 | 23,274 | 26,667 | 59% | 15% |
SG&A exp. | -12,178 | -12,760 | -12,624 | -12,873 | -12,241 | 1% | -5% |
EBIT | 4,632 | 10,254 | 9,323 | 10,401 | 14,426 | 211% | 39% |
Other inc./exp. | 665 | 687 | 1,087 | 14 | 792 | 19% | 5384% |
Interest income | 400 | 506 | 552 | 409 | 339 | -15% | -17% |
Associate inc. | 1,792 | 3,352 | 3,655 | 3,900 | 3,443 | 92% | -12% |
Interest exp. | -6,182 | -6,276 | -6,031 | -6,086 | -6,092 | -1% | 0% |
Pretax Profit | 1,307 | 8,523 | 8,585 | 8,638 | 12,909 | 888% | 49% |
Tax | -550 | -2,046 | -1,052 | -1,992 | -3,255 | 491% | 63% |
Minority Int. | -266 | -664 | -886 | -615 | -1,108 | 317% | 80% |
Core Profit | 491 | 5,813 | 6,648 | 6,030 | 8,546 | 1641% | 42% |
Extra | 661 | 1,111 | 661 | -1,858 | 3 | -99% | -100% |
Net Profit | 1,152 | 6,925 | 7,309 | 4,173 | 8,549 | 642% | 105% |
Margins (%) |
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Gross Margin | 12.0% | 15.4% | 15.4% | 15.7% | 18.5% | 6.5 | 2.8 |
SGA % Sales | 8.7% | 8.5% | 8.8% | 8.7% | 8.5% | - 0.2 | - 0.2 |
EBIT Margin | 3.3% | 6.9% | 6.5% | 7.0% | 10.0% | 6.7 | 3.0 |
Core Net Margin | 0.4% | 3.9% | 4.7% | 4.1% | 5.9% | 5.6 | 1.9 |
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