Price recovery of day old chick (DOC) to Rp 5,050 per head and the price of broilers to the level of USD 17,850 / kg in May 2016 will push the performance of listed fodder and chicken producers, such as PT Japfa Comfeed Indonesia Tbk (JPFA), PT Charoen Phokphand Indonesia Tbk (CPIN), and PT Malindo Feedmill Tbk (MAIN). However, there is a need to watch out the price increase to be only seasonal due to the fasting month and Lebaran. Issuers of poultry are also still waiting for regulation from the Ministry of Agriculture which will control the supply of DOC.
UOB Kay Hian Research said the DOC price is higher than the average price in the first quarter 2016 amounted to Rp 4,300 per chick. Broiler prices also increased from Rp 14,000 to Rp 19,000 per kg in September-December 2015 to Rp 14,000-Rp 22,000 per kg during January to May 2016. The average price of broilers in January-May 2016 reached Rp 17,500-Rp 18,500 per kg, higher than the average production cost of Rp 16,200-Rp 16,800 per kg. UOB predicts broiler segment to post an average operating margin of Rp 700 per kg in January to May 2016 reflecting the operating margin of 8% -10% vs. gross margin Rp 500-Rp 1,000 per kg.
Although the DOC and broiler prices have recovered, the volatility of the price is still high. UOB Kay Hian recommends buy for JPFA a target price of Rp 1,160 per share. Currently JPFA’s shares are traded at 13.1 times PER and PBV of 1.6 times. UOB also recommends buy for MAIN’s stock with a target price of Rp 1,635 per share. MAIN’s stock is currently traded at 20.6 times PER and PBV 2 times. The CPIN stocks is recommended to hold. CPIN is currently traded at 20.1 times PER and PBV of 3.9 times. (*)
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