| |
|
CHAROEN POKPHAND FOOD
CPF <Bt4.12>
|
|
|
Recommendation
New : BUY ON
WEAKNESS
Previous : BUY
ON WEAKNESS
Fair Value : Bt5.50
|
|
|
|
|
Disappointing
4Q02 results as margins continue to narrow
|
Charoen Pokphand Foods (CPF)
announced yesterday quite disappointing 4Q02 earnings of
only Bt275mn. Normalised profit fell 71% qoq and 66% yoy to
Bt205mn while sales were down slightly. This was largely due
to a significant decrease in domestic meat prices as well as
declining volume sales of feed and shrimp exports. CP-USA,
meanwhile, continued to record losses with a drop in sales.
As a result, CPF's gross margins narrowed to just 10.4%.
CPF generated cash flow in
2002 of Bt3,633mn or Bt0.74/share. This allowed the company
to further reduce its net debt-to-equity ratio from 0.94x in
2001 to 0.75x.
CPF also announced a
disappointing final dividend of just Bt0.03/share. Market
expectations were probably more since the company had
already paid a generous interim dividend of Bt0.31/share.
Even with the poor
performance, we're maintaining our recommendation of BUY
below Bt4.0. This is due to its diversified business
with strong cash flow and attractive dividend yield. We also
believe that the current share price already reflects the
decline in the company's performance.
CPF 4Q02
results
|
Income
statement (Bt mn) |
4Q02 |
3Q02 |
QOQ |
4Q01 |
YOY |
2002 |
2001 |
YOY |
|
Sales |
19,364 |
19,606 |
(1%) |
19,423 |
(0%) |
75,147 |
74,828 |
0% |
|
COG |
17,348 |
17,061 |
2% |
16,854 |
3% |
65,577 |
64,244 |
2% |
|
Gross margin (%) |
10.41% |
12.98% |
N.A. |
13.23% |
N.A. |
12.73% |
14.14% |
N.A. |
|
SG&A |
1,785 |
1,620 |
10% |
1,670 |
7% |
6,332 |
6,019 |
5% |
|
Interest expense |
303 |
302 |
0% |
330 |
(8%) |
1,223 |
1,361 |
(10%) |
|
Normalized profit |
205 |
696 |
(71%) |
599 |
(66%) |
2,494 |
3,344 |
(25%) |
|
Net profit |
275 |
680 |
(60%) |
621 |
(56%) |
2,609 |
3,587 |
(27%) |
|
Diluted EPS (Bt) |
0.05 |
0.14 |
(67%) |
0.16 |
(72%) |
0.56 |
0.93 |
(40%) |
Source : Kim Eng Research
CPF's full-year sales were
flat with 2001 but normalized profit dropped by 25% to
Bt2,494mn. Chicken sales, representing 51% of total domestic
livestock sales, decreased 1% due to a 20% drop in selling
prices. The market was affected by a large oversupply after
Thai broiler operators concentrated more on the domestic
market as a result of the chemical residue issue.
Livestock feed sales,
accounting for 23% of total sales, improved by 16% to
Bt16,958mn, thanks to a 14% rise in volume sales and
marginal increase in selling prices. In contrast,
aquaculture feed sales fell 12% on declining volume sales as
low prices discouraged farmers.
Export sales, accounting for
22% of total sales, fell 3%. Declines in volume and selling
prices reduced aquaculture exports by 17%. However, chicken
exports posted growth of 10% to Bt9,688mn. This is due to
growing demand from EU customers and less price volatility
as CPF mainly exported value-added chicken products.
CP-USA's sales dropped by 17%
with gross margin narrowing from a negative 3% to a negative
9% on the back of a 12% decrease in selling prices and
oversupply problem. CPF claims that the year 2002 was the
worst year for US broiler industry in 40 years.
Sales
breakdown by business (Bt mn)
|
(Bt mn) |
2001 |
% of Total |
2002 |
% of Total |
Change |
|
Feed |
28,733 |
38% |
29,361 |
39% |
2% |
|
Livestock |
14,674 |
20% |
16,958 |
23% |
16% |
|
Aquaculture |
14,059 |
19% |
12,403 |
17% |
-12% |
|
Breeder |
2,147 |
3% |
2,666 |
4% |
24% |
|
Livestock |
1,947 |
3% |
2,250 |
3% |
16% |
|
Aquaculture |
200 |
0% |
416 |
1% |
108% |
|
Meat |
36,102 |
48% |
36,784 |
49% |
2% |
|
Domestic |
19,206 |
26% |
20,382 |
27% |
6% |
|
- Livestock |
18,743 |
25% |
19,466 |
26% |
4% |
|
- Aquaculture |
463 |
1% |
916 |
1% |
98% |
|
Export |
16,896 |
23% |
16,402 |
22% |
-3% |
|
- Livestock |
8,778 |
12% |
9,688 |
13% |
10% |
|
- Aquaculture |
8,118 |
11% |
6,714 |
9% |
-17% |
|
Others |
2,558 |
3% |
1,927 |
3% |
-25% |
|
CS Operations |
5,288 |
7% |
4,409 |
6% |
-17% |
|
TOTAL |
74,828 |
100% |
75,147 |
100% |
0% |
Source : CPF
|
|