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Company Reports

16 August 2024

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JPFA Site Visit: Volume Driven Works Like a Charm

Volume Driven Works Like a Charm

KEY HIGHLIGHTS

■ To remain competitive in the increasingly crowded nugget market, SGF decided to focus on driving sales volumes rather than raising ASPs

■ After entering the sterilized milk market, JPFA will penetrate to yogurt market with new SKUs under the Real Good brand

■ We anticipate La Nina to cause raw material disruptions, especially soybean meal and corn, which could negatively affect crop yields. Based on historical data, we estimate potential price hikes of c.13% for soybean meal and 4% for corn, which could lead to 6% increase in raw material-to-COGS ratio and c.5% decline in GPM, ceteris paribus

■ At this stage, we anticipate favorable government policies, including reduced price relaxation starting from May 2024 and lower import quotas for Grand Parent Stock (GPS) in 2024 onwards, to enhance JPFA's profitability. Maintain sector Neutral on poultry. We retain a BUY rating and have upgraded our JPFA target price to1,790 (from 1,600), implying P/E ratio of 8.4x. We are currently undergoing a transfer of coverage

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Site Visit Notes JPFA

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Site Visit Notes JPFA

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