Margins hurt by rising feed costs (50% of COGS) on global energy crisis and IDR weakness. We expect Indonesian poultry stocks, including JPFA, to record lower 2026F margins on the current global energy crisis. This environment will cause higher input costs, particularly for imported soybean meal (SBM), vitamins, concentrates, and premixes, collectively accounting for approximately 50% of COGS. The surge in crude oil prices is expected to increase global demand for biodiesel, which utilizes CPO, resulting in further higher SBM prices, negative for poultry. This is compounded by the government’s recent initiative to appoint Berdikari as the single gateway for national SBM imports, as well as Indonesia’s strengthening trade relationship with the US, which may lead to greater reliance on relatively more expensive US-sourced SBM. Elevated crude oil prices will also further raise feed additive costs due to dependence on energy-intensive production processes and transportation, as we had observed in 2022. In addition, with those raw-mats being USD-linked, further IDR depreciation will apply added margin pressure. Thus, we forecast JPFA’s GPM to fall to 20.7% in 2026F (2025: 21.7%) with NPM to 5.9% (2025: 6.6%).

 

Favorable supply–demand dynamics in 2026F to retain elevated DOC & live bird prices. On a more positive note, JPFA is expected to continue benefiting from strong broiler and DOC prices, supported by tighter local supply conditions. This supply tightness was partly driven by the Indonesian government’s decision to lower GPS import quota to 535k back in 2024 (-22.6% YoY), likely to stabilize—or even limit—supply growth and further restrict 2026F market conditions. At the same time, chicken demand is projected to strengthen structurally, supported by additional 0.67mt (14% of 2026F demand) of chicken demand from the government’s free-meals program. We also believe that, despite challenging 2026F economic condition amid potential energy-related pressures, broiler demand will remain resilient amid higher fuel prices as chicken is arguably the most affordable source of protein per gram: beef is ~5x more expensive, eggs ~1.8x, and fish 1.5x.

 

HOLD — IDR 2,400 TP on mixed outlook and unexciting earnings growth through 2027F. We cut our sectoral weighting from Overweight to NEUTRAL as we expect Indonesia’s poultry sector outlook to be mixed, supported by higher broiler and DOC prices but offset by rising raw materials costs, resulting in muted bottom-line growth for JPFA of -0.8% YoY in 2026F and unexciting earnings growth in 2027F. Accordingly, we assign HOLD rating (from BUY) for JPFA, with unchanged IDR 2,400 TP. Downside risks: protracted Iran war and worsening IDR depreciation; upside risks: lower raw-mat prices and improved operating efficiencies.