Insight IPOT Tentang Poultry

Poultry OVERWEIGHT
Sector Initiation | Poultry | 11 July 2023
Sector Index Performance

3M 6M 12M
Inflection in broiler price underpins
Absolute 19.8% -11.7% -3.9% earnings recovery; initiate with OW
Relative to JCI 19.4% -13.3% -5.1%
 Poultry oversupply expected to improve to 11/2% in FY23/24F (vs.
15.0% 29/26% in FY21/22 ex-culling) from improvement in supply and demand.
10.0%
 Tangible signs of improvement in broiler price (+11.7/6.3% mom in
5.0%
0.0%
Apr/May23) on the back of resumption of culling measures post Eid
-5.0% festive.
-10.0%
 Initiate sector with OW rating and choose CPIN (TP: Rp6,200) as our
-15.0%
-20.0%
top pick due to market leadership and more stable earnings outlook.
-25.0%
Expect a more balanced poultry supply & demand dynamic in FY23/24F
05-Feb
12-Feb
19-Feb
26-Feb
11-Jun
01-Jan
08-Jan
15-Jan
22-Jan
29-Jan
05-Mar
12-Mar
19-Mar
26-Mar
07-May
14-May
21-May
28-May
04-Jun
18-Jun
25-Jun
02-Jul
09-Jul
09-Apr
02-Apr
16-Apr
23-Apr
30-Apr
With a lower GPS (Grandparent stock) quota of 600/630k in FY21/22 (vs.

JCI Index Poultry 700/650k in FY19/20), we expect the broiler supply (excluding culling impact)
to decline to 3.8/3.7mn tons (-12.6/-1.7% yoy) in FY23/24F. On the demand
Summary Valuation Metrics side, poultry consumption/capita has yet to recover to pre-pandemic level
having grown a mere 0.4% CAGR FY17-22 to reach 11.6kg/capita; with
P/E (x) 2023F 2024F 2025F
Indonesia’s disposable income/capita growth of +5.6/7.6% yoy in FY23/24F,
CPIN IJ 28.9 20.8 18.3
we estimate poultry consumption/capita shall reach 12.1/13.0kg (+4.8/6.7%
JPFA IJ 12.8 8.0 6.8
yoy). Consequently, we expect the oversupply (ex-culling) to improve to
11/2% in FY23/24F (vs. 29/26% in FY21/22), resulting in better broiler price
EV/EBITDA (x) 2023F 2024F 2025F
outlook of +2% yoy in FY24F. For FY23F, our broiler price assumption is at
CPIN IJ 21.6 16.9 14.9
Rp19k/kg (-2% yoy) due to 1Q23’s weak price of Rp17.2k/kg (implying Jun-
JPFA IJ 11.8 8.8 7.7
Dec23’s average of Rp19.4k/kg). Based on our sensitivity analysis, every 1%
change in broiler price shall impact FY23F CPIN/JPFA profit by 9.7/12.1%.
Div. Yield 2023F 2024F 2025F
CPIN IJ 0.0% 1.7% 2.4% Improving broiler price trend after weakness in 4Q22/1Q23
JPFA IJ 3.7% 3.3% 5.3% Broiler price has shown a significant improvement post Eid with end-May23
average broiler price at Rp21.9k/kg, at only -3% on 4 weeks post Eid (vs. -
28% in 2022’s 4 weeks post Eid) which is driven by culling program from
the government. Moreover, the broiler price recovery in 2Q23 correlated
with historical trends whereby historically broiler price weakness typically
persisted for a maximum of 2-3 quarters.
Net earnings accretion from plasma farmers’ integration
With the trend of independent farmers converting to plasmas farmers, we
analysed the impact of plasma integration; and found the overall plasma &
internal commercial farm integration process is net EBIT accretive even
during years with DOC & broiler price downtrend (Fig 12-13). Integrated
players benefit from additional captive markets for their feed & DOC
segments from the increase of plasma integration, and a continuation of this
on-going trend would further benefit integrated players – CPIN and JPFA.
Initiate sector with Overweight and choose CPIN as our top pick
Andrianto Saputra In sum, we initiate the poultry sector with OW and BUY ratings for both CPIN
(Rp6,200 TP) and JPFA (Rp1,850 TP). We choose CPIN as our top pick due
PT Indo Premier Sekuritas
to i) its earnings stability; ii) better processing food segment (highest margin
andrianto.saputra@ipc.co.id
compared to peers from scale & product mix); iii) strongest balance sheet
+62 21 5088 7168 ext. 712
among peers. Risks to our call include weak broiler price, higher input cost.
Fig. 1: Indonesia’s poultry summary
Lukito Supriadi Current Target EPS grow th P/E ROE
Ticker Rating
PT Indo Premier Sekuritas price price 2023F 2024F 2023F 2024F 2023F 2024F
lukito.supriadi@ipc.co.id CPIN BUY 5,475 6,200 6.1% 39.1% 28.9 20.8 11.2% 14.0%
+62 21 5088 7168 ext. 716 JPFA BUY 1,355 1,850 -10.2% 60.5% 12.8 8.0 9.5% 14.1%
Source: Company, Indo Premier
Refer to Important disclosures in the last page of this report

11 July 2023
Sector Initiation
Poultry
Investment thesis
Expect an improved supply and demand dynamics
Indonesia’s poultry industry has been plagued with severe oversupply
condition in recent years (FY17-22) that required remedial interventions
from the government in the form of culling (supply control). At the same
time, demand that is still recovering post the pandemic, the oversupply
situation was exacerbated by the high GPS (Grandparent stock)import
quota in FY18-19 (note that GPS imports would take 12-18 months before
translation to broiler supply, FS) and higher adoption of closed house
poultry systems with higher productivity. Nonetheless, we believe that we
are at an inflection point in terms of the oversupply situation with expected
improvements from both the demand and supply side which shall be more
balanced in FY23/24F.
Indonesia’s rising consumption narrative with disposable income/capita
expected to grow from US$2,637 in FY22 to reach US$2,994 in FY24F,
which in turn would lead to a higher poultry meat consumption per capita of
11.6kg in FY22 (11.4kg in FY17/12.1kg in FY19; FY17-19 CAGR of 3.0%)
to reach 13.0kg by FY24F – which is supported by the correlation between
disposable income and poultry meat consumption as seen in Fig 3. In our
estimates, this translates to a FY23/24F average demand of 67.2kg/week,
+9.6% from FY22’s. Poultry meat consumption stands as a major
beneficiary of a rising consumption backdrop due to Indonesia’s Muslim-
majority population. For instance, Malaysia’s poultry meat consumption
recorded 46.8kg/capita higher than Singapore’s despite Malaysia’s
relatively lower GDP/capita compared to Singapore. Poultry’s relatively
lower pricing (to other meat options such as beef, mutton) also renders it to
be affordable for the mass market.
Fig. 2: Poultry meat consumption per capita in SEA (Kg) in FY20 Fig. 3: Indonesia’s consumption chicken per capita (kg) tends to
increase with rising on disposable income/capita (US$)
14.0
Indonesia 10.0 13.5
2024F
Indonesia poultry meat consumption /
13.0
Thailand 7.9 12.5 2023F
2019
12.0 2018
Philippines 13.7
Capita (Kg)
11.5 2017 2022

11.0 2021
Vietnam 16.5
10.5
2020
Singapore 10.0
34
9.5
Malaysia 46.8 9.0
2,200 2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000
0 5 10 15 20 25 30 35 40 45 50 Disposable income per capita (US$/capita)
Source: IMF, WEO, Frost & Sullivan, Minister of Agriculture, Indo Premier Source: Euromonitor, Minister of Agriculture, Indo Premier
On the supply side, GPS import uptick was observed in FY19-20 but we
note that it has dropped in FY21-22 (FY21-22 average is -8.9% lower
compared to FY19-20’s, Fig 4) with expected lower supply transmission for
FY23-24 (+0.3/-1.7% yoy post culling in FY22 vs. -12.6/-1.7% before culling
in FY22). With this, the overall oversupply situation (excluding impact from
culling) is expected to improve from 26% in FY22 to 11/2% in FY23/24F, in
our view. A more balanced supply and demand broiler dynamics would
translate to a more stable and healthier broiler price level in the industry.
Broiler price is one of the key components to industry players’ profitability
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11 July 2023
Sector Initiation
Poultry
and our sensitivity analysis estimates that every 1% change in broiler price
would impact FY23F CPIN/JPFA net profit by 9.7/12.1% respectively.
Fig. 4: Indonesia GPS quota import

750 8.8% 10.0%
730 7.0% 8.0%

5.0%
707
710 700 700 6.0%
690 4.0%
675 674
670 2.0%
650 650
650 -1.0% 0.0%
630
630 -3.4% -3.6% -2.0%
-3.7%
610 600 -4.0%
590 -7.1% -6.0%

-7.7%
570 -8.0%
550 -10.0%
2015 2016 2017 2018 2019 2020 2021 2022 2023F
GPS import quota (k birds) yoy growth (RHS)
Source: Minister of Agriculture, Indo Premier
Fig. 5: Indonesia’s chicken meat supply and demand is getting Fig. 6: Indonesia’s chicken meat supply (before culling) and
better demand
3.9 0% 4.5 0%
-11% -2% -26%
-5% -9% -7% -16% -5% -15% -10% -9% -10% -33% -29% -11% -2%
-2% 4.3
3.7 3.8 4.0 4.3 4.3 -5%
3.5 3.8 3.7 4.1
-4%
3.5 3.4 3.6 3.9 3.8 -10%
-6% 3.7
3.6
3.3 3.2 3.7 -15%
3.2 3.2 3.4 -8% 3.4
3.5 3.3 3.6
3.1 3.3 -10% -20%
3.2 3.3
3.1 -12% 3.4
2.9 3.0 3.0 3.1 3.3 -25%
3.2
-14% 2.9 3.1
3.0 3.0
2.7 -30%
-16% 2.7
2.7
2.5 -18% 2.5 2.7 -35%
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
Oversupply (RHS) Supply (mn tons) Demand (mn tons) Oversupply (RHS) Supply before culling (mn tons) Demand (mn tons)
Source: Minister of Agriculture, Indo Premier Source: Minister of Agriculture, Indo Premier
Improving broiler price trend after weakness in 4Q22/1Q23

Weak broiler price was observed in 4Q22/1Q23 averaging at Rp16.9/17.2k
per kg driven by weak demand post fuel price hike and ample supply
backdrop. Nevertheless, recently broiler price has seen a meaningful
improvement post Eid, with prices averaging at Rp21.9/kg, or at -3% on 4
weeks post Eid (vs. -28% on 4 weeks post Eid last year) – which is caused
by a recent culling instruction from the government. The improvement in
broiler price in 2Q23 also correlates with historical trends, whereby
weakness in broiler price tends to persist for a maximum of 2-3 quarters.
This is partly because farmers would be less inclined to start a chick-in
cycle when the prospect is unprofitable. Hence, the broiler supply will
decrease in the coming month.
Page 3 of 40
11 July 2023
Sector Initiation
Poultry
Fig. 7: Broiler price at producer level (Rp/kg) needs 6-9months to recover

22,000 9months
6months 6months 9months Covid-period
21,000
20,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
Broiler price (Rp/kg)
Fig. 8: Average broiler price pre/post Eid, compared with Eid Fig. 9: Average broiler price pre/post Eid, compared with Eid
festive’ in 2022 festive’ in 2023
0% 0% 0% 0%
-5% -1%
-4% -5% -3% -3%
-10%
-10% -10% -6%
-10% -9%
-15% -13%
-20% -15%
-25% -22% -16%
-20% -18%
-30% -28%
-25% -24%
-35% -25%
-34%
-40% -30%
Eid-4 Eid-3 Eid-2 Eid-1 Eid Eid+1 Eid+2 Eid+3 Eid+4 Eid-4 Eid-3 Eid-2 Eid-1 Eid Eid+1 Eid+2 Eid+3 Eid+4
weeks weeks weeks week week weeks weeks weeks weeks weeks weeks week week weeks weeks weeks
2022 2023
Source: Company, Indo Premier Source: Company, Indo Premier
Despite fluctuation in DOC and broiler prices, commercial farm and

plasma integration are earnings accretive for integrated players
The pandemic has seen a trend of independent farmers shifting to plasma
farmers affiliated to integrated poultry players (Fig 10-11). Plasma farmers
are insulated from the fluctuations of the broiler price and are guaranteed a
certain margin from their operations. In turn, integrated players would
benefit from additional captive markets for their feed and DOC segments.
With the trend of independent farmers converting to plasmas, middle
stream segment (DOC) would have less exposure to external sales. As
such, what matters increasingly for integrated players are feed costs – corn
and soybean meal; and the broiler price, for its eventual output. Despite the
volatile nature of DOC and broiler prices, the overall plasma and internal
commercial farm integration process is net EBIT accretive even during
years with DOC and broiler price downswing as evidenced by our
calculations (Fig 10-11). CPIN/JPFA’s overall inter-segmental operations
EBIT have been positive from FY19-22, which also exceeds each
company’s unallocated operating expenses (mainly head office costs).
In sum, CPIN has higher earnings stability as its FY22’s inter-segment
EBIT as % of total segmental EBIT was higher at 51% vs. JPFA’s 38%. It is
worth highlighting that animal feed segment is the profit driver for CPIN and
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11 July 2023
Sector Initiation
Poultry
JPFA as FY22 animal feed segment EBIT contributed 80/68% to total

segmental EBIT.
In addition, CPIN/JPFA’s strategy to increase its internal integration is
proven to be earnings accretive despite the fluctuation (and occasional
losses) of the DOC and broiler segment given that both CPIN/JPFA never
recorded a combined EBIT loss of inter-segments of feed and DOC plus
commercial farm on annual basis for the last 5 years (Fig. 45-46).
Fig. 10: CPIN’s combined feed and DOC’ inter-segment sales to its Fig. 11: JPFA’s combined feed and DOC’ inter-segment sales to its
gross sales gross sales
85% 65.0% 61%
59% 60%
74% 74% 60.0% 58%
72% 72% 57%
75%
66% 55.0% 52%
65% 50.0%
56% 44%
55% 53% 45.0% 42%
40%
40.0%
45%
35.0%
36% 35%
35% 30.0%
25.0%
25%
20.0%
15% 15.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Inter-segment sales contribution Feed & DOC inter-segment sales to Feed & DOC gross sales
Fig. 12: CPIN’s combined inter-segment EBIT of feed/DOC’ plus Fig. 13: JPFA’s combined inter-segment EBIT of feed/DOC’ plus
commercial farms vs. broiler price chg commercial farms vs. broiler price chg
3,000 16.4% 2,822 20.0% 2,500 2,370 20.0%
2,540 14.7% 14.7%
2,500 15.0% 15.0%
2,187 2,000 16.4%
2,120 2,154 1,783
10.0% 1,595 10.0%
2,000 1,518 1,463
1,500 1,273 5.0%
5.0%
1,500
-1.5% 0.0% 1,000 0.0%
1.5% 1.5%
1,000 -1.5%
-5.0% -5.0%
506 -11.8% -3.8%
-3.8% 500 -11.8%
500 -10.0% -10.0%
- -15.0% - -15.0%
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Total inter-segment EBIT (Rp bn) Broiler price yoy chg (RHS) Total inter-segment EBIT (Rp bn) Broiler price yoy chg (RHS)
Fig. 14: CPIN’s combined inter-segment EBIT of feed/DOC’ and Fig. 15: JPFA’s combined inter-segment EBIT of feed/DOC’ and
commercial farm contribution to total segmental EBIT commercial farm contribution to total segmental EBIT
60% 60%
52% 51% 53%
50% 47% 50% 46% 44%
39% 41% 39% 41%
38%
40% 40%
30% 30%
20% 20%
14%
10% 10%
0% 0%
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Total inter-segment EBIT contribution Total inter-segment EBIT contribution
Page 5 of 40
11 July 2023
Sector Initiation
Poultry
Initiate the sector with Overweight and choose CPIN as our top picks
With improving poultry supply and demand outlook, we initiate the poultry
sector with Overweight rating with CPIN (Buy; Rp6,500 TP) as our top pick
due to (i) earnings stability, (ii) high quality of processing food segment and
(iii) healthier balance sheet, compared with JPFA.
Historically, both CPIN and JPFA’s consolidated NPM has a positive
correlation. To note, CPIN/JPFA experienced a margin pressure in FY21
and this was driven by higher input cost such as domestic corn price
(+14.2% yoy) and soybean meal price (+20.4% yoy) respectively.
Fig. 16: CPIN and JPFA’s NPM vs. broiler price Fig. 17: CPIN and JPFA’s ROE vs. broiler price
10.0% 22,000 30.0% 20,000
21,000 19,500
8.0%
20,000 25.0%
19,000
6.0% 19,000 18,500
20.0%
4.0% 18,000 18,000
17,000
2.0% 15.0% 17,500
16,000
17,000
0.0% 15,000 10.0%
16,500
14,000
-2.0% 16,000
13,000 5.0%
-4.0% 12,000 15,500
0.0% 15,000
2017 2018 2019 2020 2021 2022
CPIN's NPM JPFA's NPM Broiler price (Rp/kg) (RHS) CPIN's ROE JPFA's ROE Broiler price (Rp/kg) (RHS)
Looking forward, with the better broiler price situation since post Eid23, we
believe both CPIN and JPFA’s net profit may have bottomed in 4Q22 and
1Q23. Hence, we forecast FY23/24F CPIN’s net profit to reach Rp3.1/4.3tr
(+6.1/39.1% yoy), while JPFA’s net profit stood at Rp1.2/2.0tr (-
10.2/+60.5% yoy).
Fig. 18: CPIN’s net profit trend (Rp bn) Fig. 19: JPFA’s net profit trend (Rp bn)
5,000 4,739 100.0% 2,500 2,334 350.0%
4,554 2,288 2,270
4,500 4,165 326.6% 300.0%
3,842 80.0% 1,912
4,000 82.3% 3,645 3,621 2,000 1,854 250.0%
3,500 3,107 60.0% 200.0%
2,928
3,000 1,500 1,380 150.0%
2,498 40.0% 1,239
2,500 1,023 123.7% 100.0%
34.0% 20.0%
2,000 1,000 50.0%
1,500 13.8% 54.3% 0.0%
11.2% 0.0% 547 18.7%
5.4% 6.1%
1,000 500 -19.0% -10.2% -50.0%
-5.8% -20.0% -40.9%
500 -57.1% -70.5% -100.0%
-20.0% -19.1%
- -40.0% - -150.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Net profit yoy chg (RHS) Net profit yoy chg (RHS)
In terms of share price movement, we observed that the poultry’s P/E

multiple has lagged 1 quarter from broiler price (Fig 20-21) whereby the
correlation between broiler price T+1Q and CPIN/JPFA’s share price
performance stood at 33.3/25.2% in 1Q17-2Q23. With broiler price
improvement in 2Q23F (+22.6% qoq), we believe CPIN and JPFA’s P/E
multiple re-rating is warranted in 3Q23F.
Page 6 of 40
11 July 2023
Sector Initiation
Poultry
Fig. 20: CPIN fwd. 12M PE vs. broiler price T+1Q Fig. 21: JPFA fwd. 12M PE per month vs. broiler price T+1Q
40.0 22,000 20.0 22,000
21,000 18.0 21,000
35.0
20,000 20,000
16.0
30.0
19,000 19,000
14.0
25.0 18,000 18,000
12.0
17,000 17,000
20.0
10.0
16,000 16,000
15.0 8.0
15,000 15,000
10.0 14,000 6.0 14,000
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23F
3Q23F
CPIN fwd. 12M PE Broiler price (Rp/kg) T+1Q (RHS) JPFA fwd. 12M PE Broiler price (Rp/kg) T+1Q (RHS)
In terms of valuation, we use PE multiples methodology to derive

CPIN/JPFA’s fair value. We initiate CPIN/JPFA with BUY rating and
Rp6,200/1,850 target price based on 25.0/11.0x fwd. 12M PE (its 5-yr
mean). As of now, CPIN/JPFA is traded at 23.9/9.7x fwd. 12M PE (-0.1/-
0.4x s.d. from its 5yr mean).
In terms of fund positioning, both local funds have an OW position for CPIN
in Jun23, while foreign funds have UW position in Jun23 (Fig. 25-26). In
addition, local funds have a neutral position relative to index in Jun23, while
foreign funds position on JPFA was below its 3yr average of 0.14% vs.
0.96% in Jun23) (Fig. 27-28).
Fig. 22: CPIN is traded at 23.9x fwd. 12M PE (-0.1x s.d. from its 5yr Fig. 23: JPFA is traded at 9.7x fwd. 12M PE (-0.4x s.d. from its 5yr
mean) mean)
45.0 25.0
40.0
35.0 20.0
30.0
15.0
25.0
20.0
10.0
15.0
10.0 5.0
5.0
- -
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Apr-18
Jul-19
Jul-21
Jul-18
Oct-18
Apr-20
Apr-19
Oct-19
Jul-20
Oct-20
Apr-21
Oct-21
Apr-22
Jul-22
Oct-22
Apr-23
Jul-23
Jan-20
Jan-17
Oct-17
Apr-20
Jul-20
Oct-22
Jan-23
Apr-17
Jul-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Apr-23
Jul-23
CPIN P/E 5-yr mean +1 s.d. +2 s.d. -1 s.d. -2 s.d. JPFA P/E 5-yr mean +1 s.d. +2 s.d. -1 s.d. -2 s.d.
Source: KSEI, Indo Premier Source: KSEI, Indo Premier
Fig. 24: Poultry peers comparison

Mkt cap EV Net profit yoy grow th P/E ROE
Nam e Region
US$m n US$m n FY23F FY24F FY25F FY23F FY24F FY25F FY23F FY24F FY25F
Charoen Pokphand Indonesia 5,922 6,477 6.1% 39.1% 13.5% 28.9 20.8 18.3 11.2% 14.0% 14.6%
Japfa Comfeed Indonesia 1,048 1,939 -10.2% 60.5% 18.2% 12.8 8.0 6.8 9.5% 14.1% 15.1%
Malindo Feedmill Indonesia 71 221 NA NA 75.2% NA 8.0 4.6 N/A 5.5% 9.5%
Japfa Ltd Singapore 349 2,018 110.9% 204.7% 26.0% 20.3 6.7 5.3 1.7% 6.3% 7.7%
CP ALL Pcl Thailand 16,121 32,752 33.7% 24.2% 14.6% 32.3 26.2 22.5 8.4% 16.1% 17.6%
Tecon Biology Co Ltd China 1,557 2,381 227.0% 54.5% -38.9% 10.6 6.9 11.3 12.3% 17.3% 10.1%
Leong Hup International Malaysia 407 1,042 -29.6% 25.9% 14.4% 11.6 9.2 8.1 9.3% 11.3% 13.3%
Godrej Agrovet India 1,079 1,298 27.4% 47.2% 19.2% 18.4 12.5 10.4 17.2% 21.6% 23.3%
Sim ple average 52.2% 65.1% 17.8% 19.3 12.3 10.9 9.9% 13.3% 13.9%
Source: Bloomberg, Company, Indo Premier
Page 7 of 40
11 July 2023
Sector Initiation
Poultry
Fig. 25: CPIN’s local fund weight vs. JCI’s Fig. 26: CPIN’s foreign fund weight vs. MSCI’s
1.8% 3.5% 3.21% 3.16%
3.03%
1.6% 3.0% 2.71%
1.68%
1.4% 1.55%
1.46% 2.5% 2.24% 2.23%2.32%2.15%
1.2% 1.40%
1.02%1.05%1.01%1.05% 1.97% 1.94%
0.99% 1.82% 1.75%1.81%
1.0% 1.19% 0.94% 0.91%1.00% 2.0%
1.07% 0.83% 0.89% 1.55%
1.01% 1.42%
0.8% 0.68% 0.59% 0.97% 0.93% 0.74% 1.5%
0.90% 0.86% 0.87%0.91% 1.02%
0.6% 0.68% 0.93%
0.39% 1.0% 0.66% 0.80% 0.73%
0.33% 0.59%0.61%0.55%0.52%
0.4% 0.27% 0.49%0.43% 0.46%0.50%0.53%
0.5% 0.34%
0.2%
0.0% 0.0%
CPIN local fund weight CPIN weight on JCI CPIN foreign fund weight CPIN weight on MSCI
Fig. 27: JPFA’s local fund weight vs. JCI’s Fig. 28: JPFA’s foreign fund weight vs. MSCI’s
0.4% 0.36% 0.37% 0.2%
0.33% 0.15%
0.4% 0.32%0.33% 0.2%
0.1% 0.13% 0.13%0.13%
0.3% 0.27% 0.12%
0.25%0.25%0.25% 0.1%
0.3% 0.21% 0.10%0.09% 0.10%
0.20%0.20% 0.17% 0.1% 0.09% 0.09% 0.09%
0.2% 0.19% 0.08% 0.08%
0.14% 0.15%0.15%0.17% 0.1%
0.14% 0.14%
0.2% 0.16%0.17% 0.17% 0.12% 0.14%
0.10%0.10% 0.1% 0.05%
0.1% 0.07% 0.07% 0.09%
0.0% 0.03%
0.1% 0.0% 0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%0.00%
0.0% 0.0%
JPFA local fund weight JPFA weight on JCI JPFA foreign fund weight JPFA weight on MSCI
Page 8 of 40
11 July 2023
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Poultry
Industry Overview
Indonesia’s relatively low chicken meat consumption provides ample
room to grow on the back of rising disposable income outlook
According to Euromonitor, Indonesia’s disposable income per capita has
grown from US$2,293/capita in FY17 to US$2,517/capita in FY22 with
CAGR of 2.8% (pre covid at CAGR FY17-19 at 4.6%). Notably, Indonesia’s
disposable income per capita in FY21 has recovered from the impact of
Covid-19 and has surpassed 2019’s level. Going forward, Euromonitor
estimates Indonesia’s disposable income to reach US$3,664/capita with
CAGR of 6.8% in FY22-27F. In addition, Euromonitor estimates Indonesia’s
households with disposable income over US10k will growth from 32.0mn in
FY22F to 45.0mn in FY27F which shall translate into greater meat
consumption onwards.
Fig. 29: Indonesia’s disposable income per capita (US$) trend Fig. 30: Indonesia’s household with disposable income over
US$10,000
3,800 CAGR FY17-21: 2.4% 15.0% 50.0 20.0%
45.0
CAGR FY22-27F: 6.8% 45.0 15.2% 42.2
3,600
39.4 15.0%
3,400 8.2% 7.6% 7.2% 10.0% 40.0 36.8
6.8% 34.2
5.1% 4.7% 5.6% 35.0 32.0
3,200 29.5 29.8 10.0%
6.9% 5.0% 30.0 27.6
3,000 24.7 25.6
1.1% 25.0 8.0% 7.4% 7.6% 5.0%
3,664 6.9% 7.1% 7.1% 6.6%
2,800
3,429 0.0% 20.0 3.6%
2,600 -4.5% 3,209 0.0%
2,994 15.0
2,400 2,784 -6.4%
2,637 -5.0% 10.0
2,509 2,396 2,518 -5.0%
2,200 5.0
2,293 2,319
2,000 -10.0% 0.0 -10.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F
Disposable income per capita (US$) yoy growth (RHS) Households with Disposable Income Over US$10,000 (mn) yoy chg (RHS)
Source: Euromonitor, Indo Premier Source: Euromonitor, Indo Premier
According to Ministry of Agriculture, Indonesia’s chicken meat consumption

has reached 3.2mn tons in FY22 and this has almost recovered to 2019’s
level of 3.3mn tons (3.0mn tons in FY17 or +1.2% CAGR FY17-22).
Historically, domestic chicken meat consumption tends to move in tandem
with Indonesia’s disposable income trend. Worth highlighting that chicken
meat is one of the most affordable choices of protein which is c.60% lower
than beef’s in terms of price/kg (Fig. 32). Given rising disposable income
growth expectation (5.6% yoy in FY23F), we estimate FY23F domestic
chicken meat consumption to grow by 6% yoy – which would benefit CPIN
and JPFA as these two players command a DOC production capacity
share of 38% and 25% respectively in FY21, according to Frost & Sullivan.
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11 July 2023
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Poultry
Fig. 31: Indonesia’s chicken meat consumption yoy growth vs. Fig. 32: Indonesia’s protein source comparison
Indonesia’s disposable income yoy growth which there is a strong
correlation of 85.4% in FY18-22
15.0% 11.8% National retail Price per
8.0% Type Protein/100gr
10.0% 8.2%
6.0%
price per kg protein (Rp)
4.9%
5.0% 3.1%
5.6%
7.6% Beef 150,000 26 577
4.9% 5.1% 4.7%
0.0% Egg 30,265 13 233
1.1%
-5.0% Chicken 39,067 27 145
-4.5%
-10.0% Tofu 11,438 8 143
-16.4%
-15.0% Tempe 12,667 19 67
-20.0%
2018 2019 2020 2021 2022 2023F 2024F
Indo's chicken meat consumption yoy growth Indo's disposable income yoy growth
Source: Euromonitor, Minister of Agriculture, Indo Premier Source: BPS, USDA, Indo Premier
Fig. 33: Indonesia’s DOC production capacity share
15%
5% 38%
7%
10%
25%
CPIN JPFA Cheil Jedang MAIN New Hope Others
Source: Frost & Sullivan, Indo Premier
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11 July 2023
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Poultry
Better broiler supply and demand on the back of lower FY21/22 GPS
import
Government sets grandparent stock (GPS) import quota in yearly basis,
suggesting that government has set the chicken meat supply for the next 2
years. As a result, we think there shall be chances of excess or shortage of
chicken meat. To control balance of broiler supply and demand,
government uses culling program to control broiler supply. Worth
highlighting that 1 GPS could produce 40 parent stocks (PS) over the span
of 6-9 months, while 1 PS could produce 140 final stocks (FS) over the
span of 6-9months.
Based on data from Ministry of Agriculture, we estimate chicken meat
oversupply to reach 5-16% in FY17-22 (Fig 38); however, we think that the
oversupply may be mitigated by the government’s proactive control of
broiler supply through cutting of hatchery eggs and/or culling of DOC FS
during oversupply condition.
For example, FY20’s oversupply theoretically may reach 33% due to a drop
in demand during Covid-19 (vs. 10% in FY19); however, the government
implemented 9/1 times culling of hatchery eggs/DOC FS or equivalent to
20.3% of FY20’s broiler supply.
Moreover, government mandated an early culling of 10.2mn PS aged >50
weeks in FY20 to reduce broiler supply. Hence, the broiler price has
recovered from Rp11.1k/kg in Apr20 to Rp19.2k/kg in Dec20.
Fig. 34: Monthly DOC average price/chick Fig. 35: Monthly broiler average price/kg
8,000 24,000
7,000 22,000
6,000
20,000
5,000
18,000
4,000
16,000
3,000
14,000
2,000
1,000 12,000
0 10,000
May-18
May-21
May-17
Jan-17
May-17
Jan-18
Jan-19
May-19
Jan-20
May-20
Sep-20
Jan-21
Jan-22
May-22
Jan-23
May-23
Jan-17
Jan-18
May-18
Jan-19
May-19
Jan-20
May-20
Jan-21
May-21
Jan-22
May-22
Jan-23
May-23
Sep-17
Sep-18
Sep-19
Sep-21
Sep-22
Sep-17
Sep-18
Sep-19
Sep-20
Sep-21
DOC/chick Average price at that year Broiler price/kg Average price at that year Sep-22
Looking into FY23/24F, we estimate Indonesia’s chicken meat production

to reach 3.8/3.7mn tons (+0.3/-1.7% yoy, Fig 38) on the back of lower
FY21/22 GPS import quota of 600/630k bird (vs. 700/650k bird in FY19/20,
Fig 36) as GPS imports are estimated to translate to broiler supply within
the span of 18-24 months.
As a result, we expect the oversupply condition to narrow to 11/2% in
FY23/24F (vs. 29/26% in FY21/22, without culling). Thus, we believe this
shall provide support the broiler price in FY23/24F as it would rely less on
government intervention (culling measures) to keep broiler prices stable.
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Fig. 36: Indonesia’s GPS import quota trend Fig. 37: DOC PS life cycle has 74 weeks’ time lag
750 8.8% 10.0% Time lag: 50-74 Time lag: 8-49 Time lag: 7
730 7.0% 8.0% weeks weeks weeks
707 5.0%
710 700 700 6.0%
690 675 674 4.0% DOC Growing Producing Hatching egg
670 2.0% Parent stock (1st-24th week) (25th-66th week) (3 weeks)
650 650
650 -1.0% 0.0%
630
630 -3.4% -3.6% -3.7% -2.0%
610 600 -4.0%
590 -7.1% -6.0%
-7.7%
570 -8.0% Growing
Final Stock DOC Final Stock
550 -10.0% (4 weeks)
2015 2016 2017 2018 2019 2020 2021 2022 2023F
GPS import quota (k birds) yoy growth (RHS)

Time lag: 4
weeks
Source: Minister of Agriculture, Indo Premier Source: Company, Indo Premier
Fig. 38: Indonesia’s chicken meat supply and demand is getting Fig. 39: Indonesia’s chicken meat supply (before culling) and
better demand
3.9 0% 4.5 0%
-11% -2% -26%
-5% -9% -7% -16% -5% -15% -10% -9% -10% -33% -29% -11% -2%
-2% 4.3
3.7 3.8 4.0 4.3 4.3 -5%
3.5 3.8 3.7 4.1
-4%
3.5 3.4 3.6 3.9 3.8 -10%
-6% 3.7
3.6
3.3 3.2 3.7 -15%
3.2 3.2 3.4 -8% 3.4
3.5 3.3 3.6
3.1 3.3 -10% -20%
3.2 3.3
3.1 -12% 3.4
2.9 3.0 3.0 3.1 3.3 -25%
3.2
-14% 2.9 3.1
3.0 3.0
2.7 -30%
-16% 2.7
2.7
2.5 -18% 2.5 2.7 -35%
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
Oversupply (RHS) Supply (mn tons) Demand (mn tons) Oversupply (RHS) Supply before culling (mn tons) Demand (mn tons)
Source: Minister of Agriculture, Indo Premier Source: Minister of Agriculture, Indo Premier
Page 12 of 40
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Poultry
Fig. 40: Government initiative’s summary in adjusting poultry supply in FY19-23F

Culling Stage
No. Regulation Adjustm ent period Culling initiative
target of life
1 DGLAH No: 03124SE/PK.010/F/03/2019 21Mar-8Apr 2019 N/A HE - Cutting HE aged 18-days old by 10% of each companies' production
- Cutting HE aged 19-days old from the hatcher by 30% of fertilised eggs in
2 DGLAH No: 6996/SE/PK.010/F/06/2019 28Jun-12Jul 2019 N/A HE
Central Java
2-20Sep 2019 25.7mn HE - Withdraw ing 10mn HE aged 19-days old per w eek
3 DGLAH No: 095009/SE/PK.010/F/09/2019
2-7Sep 2019 10mn HE - Withdraw ing 10mn HE from setting
23-29Sep 2019 10mn HE - Withdraw ing 10mn HE aged 19-days old per w eek
4 DGLAH No: 10301/SE/PK.230/F/09/2019 30Sep-06Oct 2019 5mn HE - Withdraw ing 5mn HE aged 19-days old per w eek
23Sep-23Oct 2019 241k PS - Culling PS aged >60-w eeks
5 DGLAH No: 10921/SE/PK.230/F/10/2019 7-26Oct 2019 14.3mn HE - Cutting 5mn HE aged 19-days old per w eek
6 DGLAH No: 10922/SE/PK.230/F/10/2019 8Oct-31Dec 2019 N/A PS - Culling PS aged >60 w eeks
7 DGLAH No: 12859/SE/PK.230/F/11/2019 1-31Dec 2019 22.1mn HE - Cutting 5mn HE aged 19-days old per w eek in Java
8 DGLAH No: 13792/SE/PK.230/F/12/2019 1-21Jan 2020 39mn HE - Cutting 13mn HE aged 19-days old per w eek
9 DGLAH No: 940/SE/PK.010/01/2020 22-31Jan 2020 18.6mn HE - Cutting 13mn HE aged 19-days old per w eek
10 DGLAH No: 01512/SE/PK.010/F/02/2020 4-29Feb 2020 48.3mn HE - Cutting 13mn HE aged 19-days old per w eek
11 DGLAH No: 2106/SE/PK.230/F/02/2020 17-29 Feb 2020 N/A PS - Culling PS aged >60 w eeks
- Withdraw ing 10mn HE aged 19-days old per w eek in 1st and 2nd w eeks
of March 2020
12 DGLAH No: 2669/SE/PK.230/F1/03/2020 1Mar-7Apr 2020 17.5mn HE
- Withdraing 2.5mn HE aged 19-days old per w eek in 3rd w eeks of March
2020 to 1st w eek of April 2020
26Aug-5Sep 2020 11mn HE - Cutting 7mn HE aged 18-days old per w eek in Java
13 DGLAH No: 09246/SE/PK.230/F.08.2020 26Aug-13Sep 2020 4mn PS - Early culling of 4mn PS aged >50 w eeks, especially in Java
26Aug-31Dec 2020 N/A PS - Early culling PS aged >60 w eeks
20Sep-17Oct 2020 144mn HE - Reducing 36mn HE setting per w eek
14 DGLAH No: 18029/PK.230/F/09/2020 19Sep-10Oct 2020 65.9mn HE - Cutting 16.5mn HE aged 19-days old per w eek
19Sep-10Oct 2020 2.2mn PS - Early culling of 2.2mn PS aged >50 w eeks
19Oct-21Nov 2020 52.3mn DOC FS - Culling 52.3mn DOC FS
15 DGLAH No: 19037/PK.230/F/10/2020
19Oct-21Nov 2020 60.3mn HE - Cutting 60.3mn HE aged 19-days old
28Nov-31Dec20 61.3mn HE - Cutting HE aged 19-days old 61.3mn in Java, Bali and Sumatera
16 DGLAH No: 26045/PK.230/F.11/2020 28Nov-31Dec20 4mn PS - Early culling of PS aged >50w eeks
28Nov-31Dec20 N/A PS - Regular culling of PS aged >60 w eeks
17 DGLAH No: 30325/SE/PK.230/F/12/2020 5Jan-3Feb 2021 69.4mn HE - Cutting 69.4mn HE aged 19-days old in Java, Sumatera and Bali
5Feb-6Mar 2021 60.8mn HE - Cutting 60.8mn HE aged 19-days old in Java, Bali and Sumatra
18 DGLAH No: 2103/SE/PK.010/F/02/2021
Feb-Dec21 N/A PS - Regular culling of PS aged 58-65 w eeks
19 DGLAH No: 20301/SE/PK.010/F/04/2021 24Apr-8May 2021 41.4mn HE - Cutting 41.4mn HE aged 19-days old in Java, Sumatera and Bali
1-30Jun 2021 50.5mn HE - Cutting 50.5mn HE aged 19-days old
20 DGLAH No: 03281/SE/PK.010/F/06/2021
5Jun-31Dec 2021 N/A PS - Regular culling of PS aged >58 w eeks
10Jul-11Aug 2021 71.2mn HE - Cutting 71.2mn HE aged 19-days old
21 DGLAH No:01036/PK.230/F/07/2021
1Jul-31Dec 2021 N/A PS - Regular culling of PS aged >58 w eeks
- Cutting 96mn HE aged 19-days old in Sumatra, Java, Sulaw esi and
22 DGLAH No: 02194/PK.230/F/08/2021 7Aug-4Sep 2021 96mn HE
Kalimantan
23 DGLAH No: 06030/PK.230/F/09/2021 8Sep-2Oct 2021 75.6mn HE - Cutting 75.6mn HE aged 19-days old
24 DGLAH No: 06066/PK.230/F/10/2021 9Oct-13Nov 2021 94mn HE - Cutting 94mn HE aged 19-days old
- Cutting 149.9mn HE aged 19-days old in Java, Sumatera, Sulaw esi and
25 DGLAH No: 06066/PK.230/F/10/2021 18Nov-25Dec 2021 149.9mn HE
Kalimantan
26 DGLAH No: 03119/PK.230/F/01/2022 8Jan-19Feb 2022 142.3mn HE - Cutting 142.3mn HE aged 19-days old
27 DGLAH No: 16048/PK.230/F/02/2022 23Feb-30Mar 2022 130.3mn HE - Cutting 130.3mn HE aged 19-days old
28 DGLAH No: 07009/PK.230/F/10/2022 8Oct-19Nov 2022 84mn HE - Cutting 84mn HE aged 19-days old
29 DGLAH No: 13068/PK.230/F/12/2022 16Dec-28Jan 2023 42.6mn HE - Cutting 42.6mn HE aged 19-days old
- Control over the production of 104.4mn DOC FS
30 DGLAH No: B-16/PK.230/F/02/2023 25Feb-15Apr 2023 104.4mn DOC FS
- If necessary, there shall be a cutting of HE and/ culling of DOC FS
19Apr-3Jun 2023 3.9mn PS - Early culling of PS aged <53w eeks and this is equal to 93.2mn DOC FS
31 DGLAH No: 17257/PK.230/F/04/2023
19Apr-3Jun 2023 48.1mn HE - Cutting 48.1mn HE aged 19-days old
14Jun-23Jul 2023 1.9mn PS - Regular culling of PS aged betw een 50-54 w eeks
32 DGLAH No: 12087/PK.230/F/06/2023
29Jul-12Aug 2023 10.0mn HE - Cutting 10.0mn HE aged 19-days old
Source: Ministry of Agriculture, Company, Indo Premier
Page 13 of 40
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Operating Segments
Overall consolidated gross sales driver
Looking into FY23F, we forecast CPIN and JPFA to book consolidated
gross sales of Rp108.2tr (+6.7% yoy) and Rp51.2tr (4.5% yoy) – to be
driven by animal feed/processing food segments which we forecast CPIN
and JPFA to book 9.7/10.0% and 7.5/8.0% gross sales growth in FY23F.
On the other hand, DOC/commercial’s gross sales growth is expected to
be soft at -8.6/+6.8% and -18.2/+5.0% given the weakness in the
underlying prices, especially in 1Q23.
Fig. 41: CPIN’s consolidated gross sales trend (Rp bn)
140,000
CAGR FY19-22: CAGR FY22-25F:
Animal feed: 10.8% Animal feed: 5.3% 119,852
120,000 DOC: 7.4% DOC: 2.1% 113,877
108,228
Commercial farm: 23.0% Commercial farm: 7.1% 101,404 10,832
Processing food: 19.6% Processing food: 9.0% 10,029
100,000 9,201
88,001
8,365
80,000 73,972 6,937 43,549
68,069 37,858 41,096
65,861 66,457
4,337 35,450
60,000 3,967 4,887 5,601 29,336
17,493 8,878
15,660 7,627 8,499
19,054 20,882 8,343
7,505 9,798 8,505
40,000
6,740 5,909
49,111 49,886 52,291
20,000 39,692 39,537 44,751
37,948 32,855 31,754
-
2017* 2018* 2019 2020 2021 2022 2023F 2024F 2025F
Animal feed DOC Commercial farm Processing food Other
Sources: Company, Indo Premier

*Prior to restatement
Fig. 42: JPFA’s consolidated gross sales trend (Rp bn)

100,000
CAGR FY19-22: CAGR FY22-25F: 91,240
90,000 Animal feed: 11.8% Animal feed: 6.0% 85,893
DOC: 2.1% DOC: -0.4% 80,508
77,133
80,000 Commercial farm: 14.4% Commercial farm: 6.3%
Processing food: 67.8% Processing food: 7.0% 69,524 9,333
70,000 8,805
8,229
7,619
60,000 54,211 6,505 26,947
50,798 25,372
50,000 45,190 22,424 23,548
40,007 1,613 5,034 20,361
40,000 1,646 6,728
14,962 5,578 6,444
1,333 15,625 6,819
30,000 13,642 6,895
12,240
6,414 5,313
20,000 5,940
4,573 37,789
31,693 34,064 35,531
28,366
10,000 19,532 22,659 21,148
17,837
-
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Animal Feed DOC Commercial Farm Processing food Aquaculture Others
Sources: Company, Indo Premier
Page 14 of 40
11 July 2023
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Poultry
Integrated poultry players

We believe integrated poultry companies have a competitive advantage
from better controls over costs, product quality & consistency, and more
importantly economy of scale. Within the integrated business model, its
ecosystem represents a captive market which would readily absorb the
production of livestock such as DOC and livebird.
The trend of independent farmers converting to plasma farmers has also
resulted in a rising inter-segmental sales contribution as CPIN/JPFA’s
combined feed and DOC’s inter-segment sales contribution to its gross
sales significantly from 36/42% in FY17 to 72/58% in FY22 (Fig 43-44) -
which also implies a declining significance of DOC profitability as
CPIN/JPFA’s DOC intersegment sales now accounts for 82/64% of total
DOC sales. The key cost inputs and sales output for integrated companies
would increasingly be feed’s raw material (corn & soybean meal) price and
broiler price.
Fig. 43: CPIN’s combined feed and DOC’ inter-segment sales to its Fig. 44: JPFA’s combined feed and DOC’ inter-segment sales to its
gross sales gross sales
85% 65.0%
59% 60% 60%
60.0% 58%
72% 72% 73% 73% 57%
75%
66% 55.0% 52%
65% 50.0%
56% 44%
53% 45.0% 42%
55% 40%
40.0%
45% 35.0%
36% 35%
35% 30.0%
25.0%
25% 20.0%
15% 15.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Feed & DOC inter-segment sales to Feed & DOC gross sales Feed & DOC inter-segment sales to Feed & DOC gross sales
In addition, CPIN/JPFA’s strategy to increase its internal integration is

proven to be earnings accretive despite the fluctuation (and occasional
losses) of the DOC and broiler segment given that both CPIN/JPFA never
recorded a combined EBIT loss of inter-segments of feed and DOC plus
commercial farm on annual basis for the last 5 years (Fig. 47-48).
Additionally, both CPIN/JPFA’s EBIT inter-segment contribution to total
segmental EBIT has reached 51/38% in FY22 (from 14/46% in FY17), It is
worth highlighting that CPIN started to consolidate its own commercial farm
operating segment in FY16.
Page 15 of 40
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Poultry
commercial farms (Rp bn) commercial farms (Rp bn)
3,000 7.3% 2,822 8.0% 2,500 2,370 12.0%
2,540
7.0%
2,500 10.0%
2,187 2,154 2,000 1,783
2,120 6.0% 10.0%
6.7% 1,595
2,000 1,518 1,463 8.0%
5.0% 1,500
5.3% 1,273
1,500 4.0% 6.0%
1,000 5.9% 5.7%
3.6% 3.0% 5.2%
1,000 4.0%
2.9% 4.4%
506 2.0%
500 3.3%
500 2.0%
1.0%
1.6%
- 0.0% - 0.0%
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Total inter-segment EBIT Inter-segment EBIT margin (RHS) Total inter-segment EBIT Inter-segment EBIT margin (RHS)
commercial contribution to total segmental EBIT commercial contribution to total segmental EBIT
60% 60%
52% 51% 53%
50% 47% 50% 46% 44%
39% 41% 39% 41%
38%
40% 40%
30% 30%
20% 20%
14%
10% 10%
0% 0%
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Total inter-segment EBIT contribution Total inter-segment EBIT contribution
Page 16 of 40
11 July 2023
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Poultry
Animal feed segment

Animal feed producer’ business model is a cost plus model in nature, and
the most stable in terms of historical profitability compared to other
segments. CPIN/JPFA’s historical feed EBIT margin averaged at 9.7/10.1%
between FY17-22. The increasing conversion of independent farmers to
plasma/contract farmers have helped created a captive market for
integrated players such as CPIN/JPFA
According to Euromonitor, national animal feed market size has reached
Rp177.9tr in FY22 with CAGR of 10.8% in FY14-22. It is worth highlighting
that animal feed market size has fully recovered to pre-Covid level in FY21.
Looking forward, Euromonitor estimates the animal feed to reach Rp254.9tr
with CAGR of 7.5% in FY22-27F. Hence, both CPIN and JPFA would be
benefited from the rising animal feed demand as CPIN and JPFA command
feed production capacity share of 32% and 21% respectively in FY21.
Fig. 49: Indonesia’s animal feed market size trend (Rp tr)
300.0 40.0%
34.2%
254.9 35.0%
250.0 237.2
219.1 30.0%
201.3 25.0%
200.0 186.4
18.3% 177.9
20.0%
13.6% 152.1 152.3
150.0 141.7 15.0%
115.9 113.3 16.8% 8.0% 8.8% 8.3%
105.6 7.5% 7.5% 10.0%
100.0 89.3 4.8%
78.6 9.8% 5.0%
4.0% 0.0%
50.0 -6.8%
-2.2% -5.0%
- -10.0%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F
Market size (Rp tr) yoy chg
Sources: Euromonitor, Indo Premier
Fig. 50: Indonesia’s feed mills number of plants and installed Fig. 51: Indonesia’s feed mills production capacity market share in
capacity (mn tons) in FY22 FY21
Production Producation
Num ber of
capacity (m n capacity's
plants
tons/year) m arket share
North and West
13 3.3 12.1% 32%
Sumatera 41%
Southern Sumatera
6 1.6 5.9%
and Lampung
West Java and Jakarta 40 8.9 32.6%
Central Java 13 4.1 15.0% 21%
7%
East Java 28 7.5 27.5%
Kalimantan 3 0.7 2.4%
Sulaw esi 7 1.2 4.4% CPIN JPFA MAIN Others
Total 110 27.3 100.0%
Source: Indonesian Feed producers Association, Indo Premier Source: Frost & Sullivan, Indo Premier
According to USDA, the two biggest components for animal feeds are
corn/soybean meal which accounted 45/25% of total ingredient. In terms of
price adjustment, in the case of higher input cost, feed producer may not
be able to immediately pass on cost increments to consumers and may not
have the flexibility to adjust its ASP, especially during weak broiler price.
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Thus, we can see a weak EBIT margin in 4Q16/3Q17/4Q18-1Q19/4Q21

(Fig. 53-56). Nevertheless, feed producers were able to gradually increase
its animal feed ASP to improve its EBIT margin in the subsequent few
quarters.
More recently, due to strong broiler price in Apr23, CPIN raised its animal
feed ASP by Rp300/kg (+3.4% YTD) and plan to increase another
Rp300/kg onwards to pass on the higher input cost. Hence, we believe
other feed producers shall increase its ASP to follow CPIN.
Fig. 52: Average composition of feed formulation broiler in FY22
15%
45%
15%
25%
Corn Soybean meal Rice Bran Others
Sources: USDA, Indo Premier
Fig. 53: CPIN’s Feed EBIT margin vs. domestic corn price chg Fig. 54: JPFA’s Feed EBIT margin vs. domestic corn price yoy chg
17.0% 40.0% 18.0% 40.0%
15.0% 30.0% 16.0% 30.0%
13.0% 20.0% 14.0% 20.0%
11.0% 10.0% 12.0% 10.0%

9.0% 0.0% 10.0% 0.0%
7.0% -10.0% 8.0% -10.0%
5.0% -20.0% 6.0% -20.0%
3.0% -30.0% 4.0% -30.0%
1Q20
4Q20
3Q21
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19*
2Q20
3Q20
1Q21
2Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
4Q20
3Q21
2Q22
1Q23
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
1Q21
2Q21
4Q21
1Q22
3Q22
4Q22
CPIN's Feed EBIT margin Domestic corn price yoy chg (RHS) JPFA's Feed EBIT Margin Domestic corn price yoy chg (RHS)

*Prior restated
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Fig. 55: CPIN’s Feed EBIT margin vs. soybean meal price chg Fig. 56: JPFA’s Feed EBIT margin vs. soybean meal price yoy chg
17.0% 50.0% 18.0% 50.0%
15.0% 40.0% 40.0%

16.0%
30.0% 30.0%
13.0% 14.0%
20.0% 20.0%
11.0% 10.0% 12.0% 10.0%
9.0% 0.0% 10.0% 0.0%
-10.0% -10.0%
7.0% 8.0%
-20.0% -20.0%
5.0% -30.0% 6.0% -30.0%
3.0% -40.0% 4.0% -40.0%
3Q18
3Q22
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
4Q18
1Q19
2Q19
3Q19
4Q19*
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
4Q22
1Q23
2Q15
3Q15
1Q19
2Q19
3Q22
4Q22
1Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
1Q23
CPIN's Feed EBIT margin Soybean meal price yoy chg (RHS) JPFA's Feed EBIT Margin Soybean meal price yoy chg (RHS)

*Prior restated
For corn, government has restricted corn import since FY17 through
Regulation of The Minister of Trade of the Republic of Indonesia No. 21 of
2018. This policy is implemented as government wanted to maximize local
corn usage, especially for feed industry and increasing domestic corn
production. Thus, total number of corn import has decreased significantly
from 3.2mn tons in FY14 to 0.8mn tons in FY22. It is worth highlighting that
the current amount of corn import wasn’t used for feed industry, according
to Minister of Agriculture.
Despite domestic corn price dropping to Rp4.2k/kg in 4Q22 (-4.1% qoq), it
went up again to Rp4.4k/kg in 1Q23 (+4.6% qoq). The rising domestic corn
price was driven by unfavourable weather in early FY23F, leading to crop
failure in several areas. Hence, we conservatively estimate average
domestic corn price will be at Rp4.9k/kg in FY23F (vs. FY22’s Rp4.6k/kg)
even though (i) there will be another harvest season in Aug23 (accounted
40-45% of FY production) coupled with (ii) higher corn fields productivity of
3.28Mt/ha (+0.3% yoy), according to USDA.
Fig. 57: Domestic corn price tends to decline in 2H due to big harvest season
6,000 Government has banned corn import since 2017
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
Domsetic corn price (Rp/kg)
Sources: Minister of Agriculture, Indo Premier
For soybean meal, feed producers source soybeans meal from global
suppliers as Indonesia doesn’t produce soybean meal locally due to
weather conditions. According to USDA, they estimate FY23F global
soybean meal production to be flat at 246mn tons. Thus, USDA forecasts
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the soybean meal price will be flat at US$450/MT (+1% yoy). Meanwhile,
USDA expects a better global soybean meal production in FY24F due to
soybean yield improvement (+5% yoy) as they estimate global soybean
meal production will increase by 6% yoy to 261mn tons. Therefore, USDA
estimates soybean meal price to decline at US$410/MT (-9% yoy) in
FY24F; we use this projection for our SBM price.
Fig. 58: Global soybean meal production (mn tons) Fig. 59: Average global soybean meal price (US$/ton)
300 9.5% 10.0% 500 30.0%
261 443 450
248 450 422 20.3%
245 247 246 410
250 226 232 234 8.0% 381 20.0%
216 400
209 6.0% 339
191 350 318 318 316 303 317 16.1%
200 4.8% 6.0% 10.0%
4.4% 300
3.8% 7.3%
150 4.5% 2.9% 4.0% 250 4.5% 0.0%
0.2% -0.8% 1.6%
200 -2.8%
100 1.2% 2.0% -10.0%
0.7% 150 -8.9%
-0.2% -24.7% -10.4%
-0.7% 100
50 0.0% -20.0%
50
- -2.0% - -30.0%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F
Production yoy chg (RHS) Soybean meal price (US$/ton) yoy chg
Source: USDA, Indo Premier Source: USDA, Bloomberg, Indo Premier
According to USDA, Indonesia has imported 5.4mn tons soybean meal to

fulfil animal feed industry in FY22 and is expected to increase to 5.7mn
tons in FY24F. Aside from that, we observed that the Baltic Dry Index (an
index of average prices paid for transport of dry bulk materials across more
than 20 routes, Fig. 61), which has shown further retracement into May23
(-54.3% yoy). Thus, we expect the shipping cost to import soybean meal
will further decline.
Fig. 60: Indonesia soybean meal import (mn tons) Fig. 61: BDI Baltic Exchange Dry Index (US$)
7.0 16.0% 6,000 200.0%
13.4% 6.0
5.7 14.0%
6.0 5.4 5.5 5,000 150.0%
5.0 12.0%
5.0 4.5 4.4 4,000 100.0%
4.2 4.3 10.0%
3.8 3.8
4.0 8.0% 3,000 50.0%
9.3%
3.0 6.0%
6.2% 2,000 0.0%
5.7% 5.4% 5.3% 4.0%
2.0
3.3% 2.0% 1,000 -50.0%
-0.8% 3.0%
1.0
1.0% 1.2% 0.0% - -100.0%
Jul-22
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Oct-22
Jan-23
Apr-23
- -2.0%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023F 2024F
Indonesia soybean meal import (mn ton) yoy chg (RHS) BDI Baltic Exchange Dry Index (US$) yoy chg (RHS)
Source: USDA, Bloomberg, Indo Premier Source: Bloomberg, Indo Premier
In terms of animal feed gross sales, both CPIN/JPFA recorded feed’s gross
sales of Rp44.7/31.7tr in FY22 with CAGR of 10.8/11.8% in FY19-22. It is
worth highlighting that CPIN uses a new accounting standard whereby feed
sales from Plasma farmer is not recorded starting in FY20 and
restatements extend to FY19. In terms of inter-segment sales,
CPIN/JPFA’s feed inter-segment as % of animal feed gross sales has
increased significantly from 36/40% in FY17 to 70/57% in FY22. Looking
into FY23F, we forecast CPIN/JPFA to deliver FY23F animal feed gross
sales of Rp49.1/34.1tr (+9.7/7.5% yoy).
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Fig. 62: CPIN’s animal feed gross sales trend (Rp bn) Fig. 63: JPFA’s animal feed gross sales trend (Rp bn)
55,000 52,291 40.0% 40,000 37,789 40.0%
49,111 49,886 34.1%
50,000 29.2% 35,531 35.0%
44,751 30.0% 35,000 34,064
24.5% 30.0%
45,000 31,693
39,692 39,537 25.0%
40,000 37,948 20.0% 30,000 28,366
13.2% 20.0%
32,855 31,754 9.7% 16.0%
35,000
4.6% 4.8% 10.0% 25,000 11.0% 11.7% 15.0%
30,000 1.6% 9.5% 22,659
21,148 7.5% 6.4%
19,532 10.0%
25,000 -3.4% 0.0% 20,000 4.3%
17,837 5.0%
20,000 0.0%
-10.0% 15,000 -6.7%
15,000 -17.2% -5.0%
10,000 -20.0% 10,000 -10.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Gross sales yoy chg (RHS) Gross sales yoy chg (RHS)
Fig. 64: CPIN’s animal feed inter-segment sales contribution Fig. 65: JPFA’s animal feed inter-segment sales contribution
100% 100%
90% 90%
36% 30%
80% 45% 80% 45% 43%
49% 49%
70% 70% 60% 62% 57%
64% 65%
60% 60%
50% 50%
40% 40%
64% 70%
30% 55% 30% 55% 57%
51% 51%
20% 20% 40% 38% 43%
36% 35%
10% 10%
0% 0%
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Internal External Internal External
In terms of animal feed EBIT, both CPIN/JPFA’s EBIT stood at Rp3.3/2.6tr

in FY22. This proves animal feed segment as the main profit driver
whereby animal feed segment contributes 80/68% of total segmental EBIT
in FY22 (vs 5Y average of 70/61%). Looking into FY23F, despite the
assumption of domestic corn/soybean meal price’s +7/1% yoy, recent feed
ASP trends of +c.7% YTD indicate that companies are able to pass on feed
cost increment, we forecast CPIN/JPFA to book EBIT of Rp4.5/3.4tr
(+35.4/28.9% yoy) with EBIT margin of 9.2/9.9% (vs. FY22’s 7.4/8.2%).
Fig. 66: CPIN’s animal feed EBIT trend (Rp bn) Fig. 67: JPFA’s animal feed EBIT trend (Rp bn)
6,000 12.3% 13.0% 4,500 16.0%
5,137 4,050
11.7% 13.6%
5,000 4,792 12.0% 4,000 14.0%
4,514 3,646
12.4%
3,912 11.0% 3,500 3,370
3,856
4,000 3,592 3,586 10.7% 12.0%
3,333 9.6% 9.8% 10.2% 2,867 10.3%
3,142 10.0% 3,000 9.7% 2,799 9.9%
9.1% 9.2% 2,614 10.0%
3,000
9.5% 9.0% 2,500
2,000 7.9% 1,996 1,900 8.0%
7.4% 8.0% 2,000 1,734 8.2%
1,000 1,500 6.0%
7.0% 6.7%
- 6.0% 1,000 4.0%

2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
EBIT EBIT margin EBIT EBIT margin
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Fig. 68: CPIN’s animal feed EBIT contribution to total segmental EBIT Fig. 69: JPFA’s animal feed EBIT contribution to total segmental EBIT
100% 97% 120%
93%
90%
77% 80% 100% 96%
80% 74% 72% 75%
72%
70% 77% 78% 77%
80% 69%
60% 68%
49% 62%
50% 60%
45% 47%
40%
30% 40%
20%
20%
10%
0% 0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Animal feed EBIT contribution to total segmental EBIT Animal feed EBIT contribution to total segmental EBIT
Based on our sensitivity analysis, every 1% changes in domestic corn price

would change CPIN/JPFA’s FY23F net profit by 6.1/9.0%, while soybean
meal’s 4.0/6.3% respectively.
Fig. 70: CPIN’s FY23F net profit sensitivity towards corn and Fig. 71: JPFA’s FY23F net profit sensitivity towards corn and
soybean meal price soybean meal price
FY23F net
Dom estic corn price hike FY23F net Dom estic corn price hike
profit (Rp
bn) +5% +6% +7% +8% +9% profit (Rp bn) +5% +6% +7% +8% +9%
+3% 3,237 3,047 2,857 2,668 2,478 +3% 1,307 1,196 1,084 973 861
Soybean meal
Soybean meal
+2% +2%
price hike
price hike
3,361 3,172 2,982 2,793 2,603 1,385 1,273 1,162 1,050 939
+1% 3,486 3,297 3,107 2,917 2,728 +1% 1,462 1,351 1,239 1,128 1,016
+0% 3,611 3,422 3,232 3,042 2,853 +0% 1,540 1,428 1,317 1,205 1,094
-1% 3,736 3,546 3,357 3,167 2,978 -1% 1,617 1,506 1,394 1,283 1,171
Source: Indo Premier Source: Indo Premier
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Breeding farm segment

For breeding farm segment (DOC), we observed that its EBIT margin tends
to be volatile as breeders (integrated poultry companies) needs to sell all
DOCs in day one no matter how many DOCs are produced, otherwise,
breeding will incur additional costs in the form of feed to its DOC or cull it if
unsold.
The DOC price was under pressure until 1Q23 with average price of
Rp2.4k/chick (vs. Rp4.0k/chick in 4Q22), based on company data, due to
the impact of fuel price hike in Sep22. Heading into Lebaran in Apr23, DOC
price increased to Rp3.5k in Mar23 (+83.8% mom/-50.4% yoy). Looking
into 2Q23F, we estimate the DOC price will gradually recover on the back
of demand recovery coupled with government’s instruction of a fresh culling
program between 19Apr-3Jun23 - early culling on 3.9mn PS aged <53
weeks (93.2mn DOC FS) and cutting 48.1mn HE aged 19-days old. To
note, we think government’s dilemma to cull aggressively ahead of Lebaran
festive was due to considerations to ensure sufficient broiler’s supply and
affordability price during Lebaran festive.
In sum, we estimate average DOC price will be at Rp3.0k/3.5k/chick in
FY23/24F (vs. Rp4.9k/chick in FY22). Nevertheless, we think integrated
player like CPIN and JPFA will be less impacted from DOC price volatility
as CPIN/JPFA’s DOC internal sales accounted at 82/64% of total DOC
sales in FY22. In addition, the increasing on inter-segment sales was
driven by the shift from independent farmers to plasma farmers.
Fig. 72: CPIN’s DOC sales contribution Fig. 73: JPFA’s DOC sales contribution
100% 100%
90% 90%
80% 35% 36% 80%
50% 46% 50%
70% 59% 70% 56%
63% 63% 64%
60% 75% 60%
82%
50% 50%
40% 40%
30% 65% 64% 30%
50% 54% 50%
20% 41% 20% 44%
37% 37% 36%
10% 25% 10%
18%
0% 0%
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Internal External Internal External
CPIN/JPFA recorded DOC net sales of Rp1.5/2.4tr in FY22 with CAGR of -

18.9/-8.5% in FY19-22. It is worth highlighting that negative CAGR was due
to a higher inter-segment sales contribution (Fig. 72-73). Looking into
FY23/24F, we assume CPIN’s DOC price will be -16/+5% yoy, while
JPFA’s DOC price is at -20/+10% yoy. Hence, we forecast CPIN to record
DOC net sales of Rp1.3/1.4tr in FY23/24F (-14.3/+7.1% yoy), while JPFA’s
Rp2.0/2.3tr in FY23/24F (-17.6/+13.3% yoy).
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Fig. 74: CPIN’s DOC net sales trend (Rp bn) Fig. 75: JPFA’s DOC net sales trend (Rp bn)
7,000 40.0% 3,500 50.0%
6,228
30.0% 3,300 3,215 3,181 40.0%
6,000
7.1% 20.0% 3,100
4,911 26.8% 2.0% 41.8% 30.0%
5,000 -0.7% 10.0% 2,900 13.3% 20.0%
4,000 4.7% -14.3% 0.0% 2,700 18.7% 2,575 3.0%
2,433 10.0%
-10.0% 2,500 2,329 2,340
3,000 2,776 -22.2% 2,267 10.5% 2,272 0.0%
2,159 2,143 -31.0% -20.0% 2,300 -5.5%
-1.1% 2,005 -10.0%
2,000 1,478 -30.0% 2,100
1,266 1,356 1,383
-40.0% 1,900 -26.8% -20.0%
1,000 -17.6%
-55.4% -50.0% 1,700 -30.0%
- -60.0% 1,500 -40.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Net sales yoy growth (RHS) Net sales yoy growth (RHS)
In terms of DOC EBIT, both CPIN/JPFA delivered EBIT of Rp184bn/1.1tr

with EBIT margin of 2.2/16.2% in FY22. DOC’s EBIT margin difference
between CPIN and JPFA is due to a difference accounting treatment
whereby JPFA recorded a consecutive EBIT loss on its commercial farm
since 2019 – i.e, it appears that more costs are allocated in the commercial
farms rather than DOC segment for JPFA, and vice versa for CPIN. To
note, CPIN recorded 4Q22’s DOC EBIT loss of Rp441bn (vs. JPFA’s
+Rp139bn). As we have mentioned it before, DOC EBIT margin profile
tends to be volatile due to its underlying DOC price. Looking into
FY23/24F, we forecast CPIN and JPFA to book EBIT of -Rp159/+Rp193bn
and –Rp391/+Rp120bn. To note, the negative EBIT in FY23F will be driven
by weak DOC price.
Fig. 76: CPIN’s DOC EBIT trend (Rp bn) Fig. 77: JPFA’s DOC EBIT trend (Rp bn)
2,000 25% 2,000 30.0%
1,721 1,722
1,569 25.0%
20%
1,500 1,500 1,341
20.0%
1,137 1,112
15%
1,000 1,000 895 15.0%
588 10% 550 10.0%
500 500 5.0%
184 193 264
159 5% 120 152
0.0%
- -
0%
-5.0%
(105) (159)
(500) -5% (500) (391) -10.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
EBIT EBIT margin (RHS) EBIT EBIT margin (RHS)
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11 July 2023
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Commercial farm segment

For commercial farm, the EBIT margin’s trend is similar with the breeding
farms. Notably, commercial farmers have to sell its broiler when the
broiler’s size has reached 1.6-1.8kg as this broiler’ size is the most
preferred by Indonesian consumers. Notably, there is a negative
connotation for bigger size of broiler (>2.0kg) that results in lower price/kg
for bigger sized birds as there is a notion that broiler is full of artificial
growth hormones. As a result, commercial farmer holds a risk for selling a
bigger size of broiler.
For broiler price, we observed that the broiler price tends to slump in
periods of oversupply and typically required 6-9months to recover as seen
from several historical instances in Fig 78 because farmers scale back in
their chick-in activities (reduce production) when broiler prices are low. As
such, we view that the weakness in broiler prices which started in 4Q22
would start to recover in 2Q23 as evidenced by Apr/May23’s broiler price
improvement (+11.7/6.3% mom). In terms of EBIT margin, both CPIN/JPFA
delivered a positive EBIT margin on its commercial farm after recorded 2-
4Q consecutive negative EBIT margin (Fig. 79)
Fig. 78: Broiler price at producer level (Rp/kg) needs 6-9months to recover
22,000 9months
6months 6months 9months Covid-period
21,000
20,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
Broiler price (Rp/kg)
Fig. 79: CPIN & JPFA’s commercial farm historical EBIT margin
30.0% JPFA: 2Q JPFA: 1Q JPFA: 3Q Covid-19 JPFA: 1Q JPFA: 3Q
CPIN: 5Q CPIN: 4Q period CPIN: 2Q CPIN: 2Q
20.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
JPFA CPIN
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As of 1Q23, the average of broiler price remained weak at Rp17.2k/kg (-

0.9% qoq/-15.0% yoy) caused by weak demand post fuel price hike in
Sep22. This is proven as the government has conducted a culling program
of cutting 84.0/42.6mn HE aged 19-days old in 8Oct-19Nov22/16Dec22-
28Jan23 respectively, but, the broiler price continued to decline in 4Q22 (-
7.6% qoq).
During Eid festive (Apr23), the average price of broiler price stood at
Rp19.7k/kg (-12.8% yoy) and this was relatively low, compared with
previous Eid festive (Rp22.6k/kg in Apr22) due to the absence of strict
culling since 4Q22 (in 1Q23 the government issued recommendation
instead of instruction). Post FY23 Eid festive, broiler price started to
recover as the broiler price at Eid period + 4 weeks, compared with Eid,
was only -3% below Eid festive’ (vs. -28% in FY22) (Fig. 80-81), likely
driven by government’s instruction of culling program in 19Apr-3Jun23.
Hence, we estimate strong broiler price post Eid festive to be more
sustainable.
Looking into FY23F, we estimate average broiler price to decline -2% yoy
implying the average broiler price will be at Rp19.6k/kg in May-Dec23 (vs
first 3 weeks average in May of Rp20.9k/kg) recovering from Jan-Apr23’s
average of Rp17.8/kg. Meanwhile FY24F’s broiler price to increase +2%
yoy, driven by lower GPS quota in FY22 (10% lower than FY19’s level).
Fig. 80: Average broiler price pre/post Eid, compared with Eid Fig. 81: Average broiler price pre/post Eid, compared with Eid
festive’ in 2022 festive’ in 2023
0% 0% 0% 0%
-5% -1%
-4% -5% -3% -3%
-10%
-10% -10% -6%
-10% -9%
-15% -13%
-20% -15%
-25% -22% -16%
-20% -18%
-30% -28%
-25% -24%
-35% -25%
-34%
-40% -30%
Eid-4 Eid-3 Eid-2 Eid-1 Eid Eid+1 Eid+2 Eid+3 Eid+4 Eid-4 Eid-3 Eid-2 Eid-1 Eid Eid+1 Eid+2 Eid+3 Eid+4
weeks weeks weeks week week weeks weeks weeks weeks weeks weeks week week weeks weeks weeks
2022 2023
CPIN/JPFA booked commercial farm gross sales of Rp35.5/22.4tr in FY22

with CAGR of 23.0/14.4% in FY19-22. With our broiler price assumption,
we forecast CPIN and JPFA to deliver FY23/24F gross sales of
Rp37.9/41.1tr (+6.8/+8.6% yoy) and Rp23.5/25.4tr (+5.0/+7.7% yoy).
Page 26 of 40
11 July 2023
Sector Initiation
Poultry
Fig. 82: CPIN’s commercial farm gross sales trend (Rp bn) Fig. 83: JPFA’s commercial farm gross sales trend (Rp bn)
50,000 50.0% 28,000 26,947 35.0%
43,549 25,372
45,000 41,096 26,000
30.0%
37,858 40.0% 23,548
40,000 35,450 24,000 22,424
25.0%
35,000 22,000
29,336 30.0% 20,361
30,000 20,000 20.0%
25,000 20,882 20.0% 18,000 15.0%
20,000 17,493 19,054 15,625
15,660 16,000 14,962
10.0% 13,642 10.0%
15,000
14,000
12,240
10,000 5.0%
0.0% 12,000
5,000
10,000 0.0%
- -10.0% 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Gross sales yoy chg (RHS)
Gross sales yoy chg (RHS)
In terms of broiler segment EBIT both CPIN/JPFA recorded negative EBIT

of -Rp316/744bn in FY22 and this was driven by weak broiler price in 2H22
(-12.9% HoH) amidst fuel price hike in Sep22. It is worth highlighting that
both CPIN/JPFA recorded a positive EBIT of Rp389/289bn in 1H22.
Looking into FY23F, we estimate both CPIN/JPFA to book an improved
EBIT loss of -Rp294/-253bn and this was driven by lower input cost from
DOC. As we expect a better broiler price in FY24F (+2% yoy), we forecast
CPIN/JPFA to book a positive EBIT of Rp465/29bn respectively
Fig. 84: CPIN’s commercial farm EBIT trend (Rp bn) Fig. 85: JPFA’s commercial farm EBIT trend (Rp bn)
1,000 812 806 6% 1,200 8%
731 995
1,000
465 4% 6%
500 800
2% 600
400 303 4%
- 0% 157
200 29 2%
(316) (294) -2% -
(500)
(528) (200) (50) (93) 0%
-4%
(400) (253)
(1,000) (342)
(992) -6% (600) -2%
(800)
(1,500) (1,279) -8% (744)
(1,000) -4%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
EBIT EBIT margin (RHS)
EBIT EBIT margin (RHS)
Based on our sensitivity analysis, every 1% changes in broiler price would

change CPIN/JPFA’s FY23F net profit by 9.7/12.1%.
Fig. 86: Broiler price sensitivity shows that CPIN is less volatile than JPFA by 2.4%.
Broiler price hike
-4.0% -3.0% -2.0% -1.0% 0.0%
CPIN
FY23F net profit (Rp bn) 2,506 2,807 3,107 3,407 3,707
Chg from base case -19.3% -9.7% 0.0% 9.7% 19.3%
JPFA
FY23F net profit (Rp bn) 940 1,090 1,239 1,389 1,539
Chg from base case -24.2% -12.1% 0.0% 12.1% 24.2%
Sources: Indo Premier
Page 27 of 40
11 July 2023
Sector Initiation
Poultry
Processing food segment.

According to Euromonitor, Indonesia’ frozen processed poultry retail
market size stood at Rp11.4tr in FY22 with CAGR of 9.0% in FY14-22.
Frozen processed poultry market size has fully recovered to pre-Covid
level in FY21. Looking forward, Euromonitor forecast frozen processed
poultry to reach Rp19.5tr in FY27F with CAGR of 17.5% in FY22-27F and
this will be driven by higher disposable income (Fig. 29).
The robust processing food industry outlook shall boost CPIN/JPFA’s
processing segments as CPIN and JPFA commanded 52.4 and 35.3% of
frozen processing poultry market share in FY22, according to Euromonitor.
Fig. 87: Indonesia’s frozen processed poultry market size trend (Rp Fig. 88: Indonesia’s frozen processing poultry market share
tr)
25.0 18.1% 20.0% 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
17.3% 17.1%17.4%17.4%17.6%
90% 3.9% 4.8% 4.8% 5.4% 5.5% 5.6%
13.8%14.6% 19.5 80%
20.0 15.0%
11.6% 12.0%12.5% 70% 42.7% 37.9% 38.7% 36.9% 35.3%
16.5 41.9%
14.0 60%
15.0 7.3% 7.5% 10.0% 50%
12.0
10.2 40%
10.0 8.7 5.0% 30%
7.6 6.9 7.7 47.7% 47.5% 51.8% 49.5% 51.0% 52.4%
6.0 6.5 20%
5.0 5.6
4.4 10%
5.0 0.0%
0%
2017 2018 2019 2020 2021 2022
- -5.0%
Charoen So Good Food Sierad Produce
Macroprima Pangan Utama Private label Others
Frozen processed poultry (Rp tr) yoy chg (RHS)
Source: Euromonitor, Indo Premier

Source: Euromonitor, Indo Premier
*Market size is based on MSP (manufacturer Selling Price)
We believe the growing penetration of fridge freezer penetration in

households and MT channel will provides a potential growth on chicken
consumption due to longer shelf times and availability of products.
Moreover, to boost the chicken consumption and accelerate MT sales
penetration, CPIN/JPFA’s have developed their own retail chain Prima/Best
Meat shop amounting to c.1,200/400 stores in Indonesia as of FY22.
Page 28 of 40
11 July 2023
Sector Initiation
Poultry
Fig. 89: Indonesia fridge freezer penetration trend in Indonesia’s Fig. 90: Prima Freshmart and Best Meat comparison
household
62.0% 61.4%
60.6% Prim a Freshm art Best Meat
60.0% 59.4% Ow ner CPIN JPFA
57.9% Golden Fiesta, Fiesta, CP So Good, Omayo, Best
58.0%
Brands Chicken, Okey, Champ, Chicken, Greenfields,
56.2%
56.0% Akumo, Asimo Tora Duo, Tokusen
54.5%
Raw chicken, processed Raw chicken, processed
54.0%
Products chicken, seasoning flour, chicken, beef, fish, milk,
52.0% egg, RTE meal instant sauces
50.0%
No of stores c.1,200 >400
2018 2019 2020 2021 2022 2023F Internal Japfa Best, Best Meat
Prima Freshmart, Prima
Fridge freezer penetration distribution Point, Best meat, Meat
Meat Shop, Kios, Unggas
channcels market
Price (Rp)
Chicken nugget 49,500: 500gr 45,500: 400gr
Chicken sausage 49,000: 500gr 45,000: 300gr
Chicken fillet 1kg 69,000 53,000
Whole chicken
39,500 39,000
0.9-1kg
Source: Euromonitor, Indo Premier Source: Company website, Indo Premier
Both CPIN and JPFA recorded processing food gross sales of Rp8.4/7.6tr
in FY22 with CAGR of 22.2/23.0% in FY20-22. Note that JPFA acquired PT
So Good Food Manufacturing in Nov20. Looking into FY23F, we
conservatively estimate CPIN/JPFA processing food gross sales to reach
Rp9.2/8.2tr (+10.0/8.0% yoy) which we take into account from tightening
competition as Kanzler brand is aggressively trying to penetrate the
segment.
Fig. 91: CPIN’s processing food gross sales trend (Rp bn) Fig. 92: JPFA’s processing food gross sales trend (Rp bn)
12,000 30.0% 10,000 9,333 40.0%
10,832 8,805
10,029 9,000 8,229 35.0%
10,000 23.9% 25.0%
9,201 8,000 7,619 30.0%
8,365
7,000 6,505
29.2% 25.0%
8,000 6,937 20.0%
20.6% 6,000 23.5% 20.0%
5,034
6,000 12.2% 5,601 15.0% 5,000 15.0%
4,887 17.1%
3,967 4,337 4,000 10.0%
14.6%
4,000 12.7% 10.0%
3,000 8.0% 5.0%
9.3% 10.0% 1,646 7.0% 6.0%
9.0% 2,000 1,333 1,613 0.0%
2,000 8.0% 5.0%
1,000 -5.0%
-4.6% -2.0%
- 0.0% - -10.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Gross sales yoy chg (RHS) Gross sales yoy chg (RHS)
In terms of EBIT, CPIN delivered FY22 EBIT of Rp997bn with EBIT margin
of 11.9%, while JPFA’s Rp306bn with EBIT margin of 3.6%. In addition,
CPIN’s processing food contributed 23.8% of total segmental EBIT, while
JPFA’s 6.2% in FY22. This is suggesting that CPIN has a superior product
targeting mid to mid-up segments, while JPFA’s was diluted by its
affordable brands.
On JPFA, we see an EBIT margin improvement at JPFA’s processing food
segment since JPFA acquired PT So Good Food Manufacturing in Nov20
as its EBIT margin turned positive to 3.9% in FY20 vs. -2.0% in FY19.
Page 29 of 40
11 July 2023
Sector Initiation
Poultry
Looking into FY23F, we conservatively forecast that CPIN to deliver an

EBIT of Rp821bn (-17.6% yoy) with EBIT margin of 8.9% as the company
estimate the EBIT margin dilution will be driven by frozen chicken carcass
(GPM at c.10%), while JPFA’s EBIT at Rp239bn with EBIT margin of 2.9%.
Fig. 93: CPIN’s processing food EBIT trend (Rp bn) Fig. 94: JPFA’s processing food EBIT trend (Rp bn)
1,200 18.0% 300 274 6.0%
1,077 258
242 239 241
16.0% 14.8% 997 250
1,000 950 16.0% 195 4.0%
16.7% 200
827 821 3.7%
784 770 3.1% 2.9% 2.9% 2.9% 2.0%
800 723 14.0% 150 3.9%
14.7%
582 100 0.0%
600 12.0% -2.0% -2.0%
50 -2.0%
11.9%
400 11.1% 10.0% -
-4.0%
9.9% (50) -6.3%
9.5% (34) (32)
200 8.9% 8.0% -6.0%
(100)
(84)
- 6.0% (150) -8.0%
2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
EBIT EBIT Margin (RHS) EBIT EBIT margin
Fig. 95: CPIN’s processing food EBIT contribution to total segmental Fig. 96: JPFA’s processing food EBIT contribution to total segmental
EBIT EBIT
30.0% 8.0%
6.9%
6.0% 6.2%
25.0% 23.8% 6.0% 5.3% 5.6% 5.2%
20.0% 4.0%
16.5% 16.9%
15.6% 15.1% 15.3% 14.9% 15.0%
15.0% 2.0%
11.2%
10.0% 0.0%
5.0% -0.8% -0.8%

-2.0%
0.0% -4.0% -3.0%

2017 2018 2019 2020 2021 2022 2023F 2024F 2025F 2017 2018 2019 2020 2021 2022 2023F 2024F 2025F
Processing food EBIT contribution to total segmental EBIT Processing food EBIT contribution to total segmental EBIT
Page 30 of 40
11 July 2023
Sector Initiation
Poultry
Dupont analysis - Comparison with

peers
On the NPM side, CPIN delivered the strongest NPM, compared with JPFA
in FY22 and this was due to higher EBIT margin profile on poultry
processing and consumer product by 880bps coupled with lower opex % to
gross sales of 230bps. In addition, CPIN and JPFA have a higher NPM
than average regional peers’ 1.4%
Looking into FY23F, we forecast CPIN’s NPM to be flat at 2.9%, while
JPFA’s NPM decline to 1.5% (-30bps yoy) as we take into account of the
weak 1Q23 performance.
On the sales turnover, both CPIN and JPFA delivered a similar sales
turnover at 2.7x and 2.5x in FY22 respectively. Moreover, both CPIN and
JPFA has a superior sales turnover than average regional’s (1.5x)
On the equity multiplier, CPIN has a lower leverage at 1.5x in FY22 vs.
JPFA’s 2.5x as JPFA has US$350mn sustainability-linked bond.
Comparing with regional peers’, CPIN/JPFA’s equity multiplier is lower than
its average regional peers’ (3.2x).
We forecast CPIN’s ROE to slightly decline to 11.2% (-20bps yoy) in
FY23F and this is driven by higher equity level as CPIN decided to not
distribute dividend in FY23. Meanwhile, JPFA’s ROE dropped to 9.5% (-
160bps yoy) and this is driven by lower NPM in FY23F. In addition, both
CPIN and JPFA’s ROE are estimated to be higher than its average regional
peers’ (6.5%) and this will be driven by higher NPM profile (average
regional’s NPM at 1.4%).
Fig. 97: Poultry’s dupont analysis (1) Fig. 98: Poultry’s dupont analysis (2)
2019 2020 2021 2022 2023F 2024F 2019 2020 2021 2022 2023F 2024F
Charoen Pokphand Indonesia (CPIN IJ) CP All PCL (CPALL TB)
NPM 5.5% 5.8% 4.1% 2.9% 2.9% 3.8% NPM 3.9% 3.1% 2.3% 1.6% 1.9% 2.2%
Sales turnover 2.3 2.2 2.6 2.7 2.6 2.6 Sales turnover 1.5 1.2 0.8 0.9 1.1 1.3
Equity multiplier 1.4 1.4 1.4 1.5 1.5 1.4 Equity multiplier 3.6 4.1 3.6 3.2 4.0 5.7
ROE 18.2% 17.4% 14.9% 11.4% 11.2% 14.0% ROE 20.5% 14.6% 6.4% 4.6% 8.4% 16.1%
Japfa Com feed (JPFA IJ) Japfa Ltd (JAP SP)

NPM 3.6% 1.0% 3.4% 1.8% 1.5% 2.3% NPM 3.1% 8.3% 2.9% 0.2% 0.4% 1.2%
ROE 17.3% 5.0% 20.4% 11.1% 9.5% 14.1% ROE 9.9% 19.8% 5.8% 0.5% 1.7% 6.3%
Malindo Feedm ill (MAIN IJ) Leong Hup International BHD (LHIB MK)
NPM 2.0% -0.6% 0.7% 0.2% -0.5% 1.0% NPM 2.5% 1.9% 1.2% 2.4% 1.8% 2.2%
ROE 7.4% -1.7% 2.6% 1.1% N/A 5.4% ROE 7.6% 5.1% 3.7% 8.8% 9.3% 11.3%
Source: Bloomberg, Company, Indo Premier Source: Company, Indo Premier
Page 31 of 40
Charoen Pokphand Indonesia BUY
Company Initiation | Poultry | CPIN IJ | 11 July 2023
Stock Data
Target price Rp6,200
Size does matter
Prior TP NA  We expect a robust recovery in earnings from 2Q23F onwards after
Current price Rp5,475 bottoming in 4Q22-1Q23 led by solid broiler price improvement.
Upside/downside +13%  High margin processing food segment shall support CPIN’s earnings
Shares outstanding (mn) 16,398 stability with EBIT contribution of 16.9/15.3% in FY23/24F
Market cap (Rp bn) 89,779
 Initiate CPIN with a BUY rating and Rp6,200 TP, based on 25.0x fwd.
Free float 44%
12M PE led by FY23/24F earnings growth of 6.1/39.1% yoy.
Avg. 6m daily T/O (Rp bn) 47
Bottoming earnings in 4Q22-1Q23 and may start to recover in 2Q23F
Price Performance
CPIN recorded 4Q22/1Q23 net profit of -Rp257/+241bn and this was driven
by weak broiler price of Rp17.3/17.2k/kg (-11.8/-15.0% yoy). With the current
3M 6M 12M
improved broiler price trend and outlook (Apr/May23’s Rp19.7/20.9k per kg),
Absolute 20.9% -12.4% -4.8%
we think 4Q22/1Q23’s earnings may have bottomed and we expect a
Relative to JCI 20.5% -14.0% -6.8%
recovery in 2Q23F onwards. Moreover, CPIN has raised its animal feed ASP
52w low/high (Rp) 4,420-6,250
by Rp300/kg (+3.4% YTD) in Apr23 and plan to increase another Rp300/kg
15%
onwards to pass on the higher input cost. It is worth highlighting that animal
10%
feed segment is CPIN’s main profit driver i.e. FY19-22 average animal feed
5% contribution to total segmental EBIT was at 76%. As such, we expect FY23F
0% animal feed segment EBIT margin improve to 9.2% (+174bps yoy). In sum,
-5%
we forecast CPIN to deliver FY23/24F net profit of Rp3.1/4.2tr (+6/+34% yoy)
-10%
-15% Processing food contribution shall support to CPIN’s earnings stability

-20% We estimate FY23/24F net sales to grow at +10.0/+9.0% vs. CAGR of 15.4%
-25% in FY16-22. As such, we forecast its gross sales to reach Rp8.4/9.2tr in
FY23/24F (15.3/15.7% of total net sales). In terms of EBIT, we forecast its
JCI Index CPIN IJ
FY23/24F EBIT will be at Rp821/950bn (-17.6/+15.7% yoy) with EBIT margin
of 8.9/9.5% (vs. 11.9% in FY22), representing 16.9/14.9% of total segmental
Major Shareholders EBIT. Lower EBIT margin is estimated due to product mix as frozen
Charoen Pokphand Indonesia Group 55% carcasses from the addition of slaughterhouses slightly dilutes the margin.
The most integrated poultry player in Indonesia
CPIN is the largest poultry player in Indonesia and its business has reached
an economic of scale as reflected on its FY22 opex % to gross sales of 4.2%
is below than its peers (vs. JPFA’s 6.4%). In addition, CPIN’s FY22 balance
sheet is the strongest among its peer with net cash position (vs. JPFA’s 57%
net debt).
Initiate coverage on CPIN with BUY rating and TP of Rp6,200/sh
We initiate our coverage on CPIN with a TP of Rp6,200/sh, based on 25.0x
fwd. 12M PE (its 5yr mean). We choose CPIN as our top pick due to i) its
earnings stability; ii) better processing food segment (highest margin
compared to peers from scale & product mix); iii) strongest balance sheet
among peers. Key downside risks are weak broiler price and higher input cost
Financial Summary (Rp bn) 2021A 2022A 2023F 2024F 2025F
Andrianto Saputra Revenue 51,698 56,868 60,306 63,765 66,998
EBITDA 5,916 5,125 5,901 7,489 8,382
PT Indo Premier Sekuritas Net profit 3,621 2,928 3,107 4,322 4,905
andrianto.saputra@ipc.co.id EPS (Rp) 221 179 189 264 299
EPS growth -5.8% -19.1% 6.1% 39.1% 13.5%
+62 21 5088 7168 ext. 712
ROE 14.9% 11.4% 11.2% 14.0% 14.6%
PER (x) 24.8 30.7 28.9 20.8 18.3
EV/EBITDA (x) 21.5 25.4 21.6 16.9 14.9
Lukito Supriadi Dividend yield 2.0% 2.0% 0.0% 1.7% 2.4%
PT Indo Premier Sekuritas Forecast change N/A N/A N/A
IPS vs. consensus 103% 101% 91%
lukito.supriadi@ipc.co.id
Source: Company, Indo Premier Share price closing as of: 11 July 2023
+62 21 5088 7168 ext. 716
Page 32 of 40Refer to Important disclosures in the last page of this report

11 July 2023
Company Initiation
Charoen Pokphand Indonesia
Fig. 93: CPIN’s financial highlight

2021 2022 2023F 2024F 2025F
Gross sales 88,001 101,404 108,228 113,877 119,852
Net sales 51,698 56,868 60,306 63,765 66,998
Gross profit 8,139 8,144 9,174 10,946 12,009
EBIT* 4,934 3,984 4,655 6,163 6,928
Net profit 3,621 2,928 3,107 4,322 4,905
Margin, %
Gross margin 9.2% 8.0% 8.5% 9.6% 10.0%
EBIT margin 5.6% 3.9% 4.3% 5.4% 5.8%
Net profit margin 7.0% 5.1% 5.2% 6.8% 7.3%
Segm ental
Gross sales
Animal feed 39,537 44,751 49,111 49,886 52,291
DOC 8,505 8,343 7,627 8,499 8,878
Commercial farm 29,336 35,450 37,858 41,096 43,549
Processing food 6,937 8,365 9,201 10,029 10,832
Others 3,685 4,496 4,431 4,366 4,303
EBIT
Animal feed 3,586 3,333 4,514 4,792 5,137
DOC 1,569 184 (159) 193 159
Commercial farm (1,279) (316) (294) 465 806
Processing food 770 997 821 950 1,077
Others 24 (13) (12) (12) (12)
EBIT m argin
Animal feed 9.1% 7.4% 9.2% 9.6% 9.8%
DOC 18.4% 2.2% -2.1% 2.3% 1.8%
Commercial farm -4.4% -0.9% -0.8% 1.1% 1.9%
Processing food 11.1% 11.9% 8.9% 9.5% 9.9%
Others 0.7% -0.3% -0.3% -0.3% -0.3%
*Included unallocated opex
Fig. 94: CPIN is traded at 23.9x fwd. 12M PE (at -0.1 s.d. below its 5Y mean)
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
Jan-21
Jan-22
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Oct-19
Jan-20
Apr-19
Jul-19
Apr-20
Jul-20
Oct-20
Apr-21
Jul-21
Oct-21
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23
CPIN P/E 5-yr mean +1 s.d. +2 s.d. -1 s.d. -2 s.d.
Source: Company, Bloomberg, Indo Premier
Page 33 of 40
11 July 2023
Company Initiation
Income Statement (Rp bn) 2021A 2022A 2023F 2024F 2025F

Net revenue 51,698 56,868 60,306 63,765 66,998
Cost of sales (43,559) (48,724) (51,131) (52,819) (54,990)
Gross profit 8,139 8,144 9,174 10,946 12,009
SG&A Expenses (3,204) (4,160) (4,519) (4,783) (5,081)
Operating profit 4,934 3,984 4,655 6,163 6,928
Net interest (289) (399) (662) (660) (641)
Others 312 (250) (240) (282) (363)
Pre-tax income 4,958 3,336 3,753 5,220 5,925
Income tax (1,015) (607) (644) (896) (1,016)
Net income 3,621 2,928 3,107 4,322 4,905
Balance Sheet (Rp bn) 2021A 2022A 2023F 2024F 2025F

Cash & equivalent 1,803 2,042 5,072 5,929 7,157
Receivable 1,794 1,820 2,498 2,647 2,711
Inventory 7,655 9,000 8,130 8,708 9,007
Other current assets 4,462 5,169 5,169 5,169 5,169
Total current assets 15,715 18,031 20,870 22,453 24,044
Fixed assets 16,256 17,628 18,082 19,456 20,702
Other non-current assets 2,397 3,143 3,143 3,143 3,143
Total non-current assets 18,653 20,771 21,225 22,599 23,845
Total assets 34,368 38,802 42,095 45,052 47,889
ST loans 4,587 6,649 6,649 6,649 6,649

Payable 2,402 2,446 2,632 2,786 2,833
Other payables 0 0 0 0 0
Current portion of LT loans 848 1,014 1,014 1,014 1,014
Total current liab. 7,836 10,109 10,295 10,450 10,496
Long term loans 1,358 2,312 2,312 2,312 2,312
Other LT liab. 1,102 1,099 1,099 1,099 1,099
Total liabilities 10,296 13,520 13,706 13,861 13,907
Equity 172 172 172 172 172

Retained earnings 24,963 26,139 29,246 32,048 34,839
Minority interest 15 17 17 17 17
Total SHE + minority int. 25,150 26,327 29,434 32,236 35,027
Total liabilities & equity 35,446 39,848 43,140 46,097 48,934
Page 34 of 40
11 July 2023
Company Initiation
Cash Flow Statement (Rp bn) 2021A 2022A 2023F 2024F 2025F
Net income 4,934 3,984 4,655 6,163 6,928
Depr. & amortization 981 1,140 1,246 1,326 1,454
Changes in working capital (1,017) (1,326) 377 (572) (317)
Others (2,484) (2,067) (1,548) (1,841) (2,023)
Cash flow from operating 2,415 1,731 4,731 5,076 6,041
Capital expenditure (2,781) (2,594) (1,700) (2,700) (2,700)
Others (185) (402) 0 0 0
Cash flow from investing (2,967) (2,996) (1,700) (2,700) (2,700)
Loans 1,846 3,017 0 0 0
Equity (25) (1) 0 0 0
Dividends (1,819) (1,753) 0 (1,520) (2,114)
Others 0 0 0 0 0
Cash flow from financing 3 1,262 0 (1,520) (2,114)
Changes in cash (549) (2) 3,031 857 1,228
Key Ratios 2021A 2022A 2023F 2024F 2025F

Gross margin 9.2% 8.0% 8.5% 9.6% 10.0%
Operating margin 5.6% 3.9% 4.3% 5.4% 5.8%
Pre-tax margin 5.3% 3.5% 3.5% 4.6% 4.9%
Net margin 4.1% 2.9% 2.9% 3.8% 4.1%
ROA 10.9% 7.8% 7.5% 9.7% 10.3%
ROE 14.9% 11.4% 11.2% 14.0% 14.6%
Acct. receivables TO (days) 13.8 11.6 15.1 15.2 14.8

Inventory TO (days) 56.4 62.4 58.0 60.2 59.8
Payable TO (days) 18.0 18.2 18.8 19.3 18.8
Debt to equity 5.4% 8.8% 7.9% 7.2% 6.6%

Interest coverage ratio (x) -15.0 -9.5 -6.9 -9.1 -10.2
Net gearing -1.8% 1.0% -9.4% -11.2% -13.8%
Page 35 of 40
Japfa Comfeed Indonesia BUY
Company Initiation | Poultry | JPFA IJ | 11 July 2023
Stock Data
Target price Rp1,850
Undemanding valuation on the back of
Prior TP N/A poultry sector recovery
Current price Rp1,355
Upside/downside +36%
 We estimate JPFA’s earnings to recover strongly in 2Q23, marking an
Shares outstanding (mn) 11,727
inflection point after 2 consecutive quarters of net losses on the back of
Market cap (Rp bn) 15,890
solid broiler price improvement in 2Q23 (+22.6% qoq)
Free float 42%  Cheaper alternative to CPIN with widening valuation discount of 60%
Avg. 6m daily T/O (Rp bn) 22 (vs. 5yr avg of 48%) at 9.0x fwd. 12M PE.
 Initiate JPFA with a BUY rating and TP of Rp1,850/sh, based on 11.0x
Price Performance fwd. 12M PE
3M 6M 12M Earnings has been bottoming in 1Q23 and start to recover in 2Q23F
Absolute 20.4% -1.5% -4.6% Due to weak broiler price in 4Q22/1Q23 of Rp17.3/17.2k/kg (-11.8/-15.0%
Relative to JCI 20.1% -3.1% -5.7% yoy), JPFA recorded net loss of Rp143/265bn respectively. However, we
52w low/high (Rp) 1,040 – 1,615 think the weak result has bottomed out 1Q23 as we observed the broiler price
start to recover in Apr/May-23 at Rp19.7/20.9k/kg. On the animal feed
15%
segment, JPFA guided that its EBIT margin to improve in FY23F as the
10%
5%
company will focus on operating efficiency and price hike if it is necessary.
0% Therefore, we estimate animal feed EBIT margin to improve to 9.9% in
-5% FY23F (vs. 8.6/9.2% in 4Q22/1Q23). It is worth highlighting that average of
-10% FY19-22 animal feed EBIT % to total segmental EBIT stood at 65%,
-15%
suggesting this segment as JPFA’s main profit driver. In general, we estimate
-20%
-25%
JPFA to book FY23/24F net profit of Rp1.2/2.0tr (-10.2/+60.5% yoy).
Potential ample earnings upside on the back of strong broiler price
JCI Index JPFA IJ
With the better poultry supply and demand in FY23/24F, we expect JPFA to
book earnings accretion from stronger broiler price. Based on our sensitive
Major Shareholders analysis, every 1% changes in broiler price would change 12.1% of FY23F
Japfa Ltd 55% net profit (vs. CPIN’s 9.7%).
Widening valuation discount against market leader
As of now, JPFA is traded at 9.7x fwd. 12M P/E (-0.4 s.d. from its 5yr mean)
whereby JPFA’s valuation is 59% below than CPIN’s. It is worth highlighting
that valuation discount has widened to 60% (vs. 49% of its 5yr mean).
Initiate coverage on JPFA with BUY rating and TP of Rp1,850/sh
We initiate our coverage on JPFA with a TP of Rp1,850/sh, based on 11.0x
fwd. 12M PE (its 5yr mean). Key downside risks are weak broiler price, higher
input cost and US$ appreciation
Financial Summary (Rp bn) 2021A 2022A 2023F 2024F 2025F

Andrianto Saputra Revenue 44,878 48,972 51,171 54,434 57,669
EBITDA 4,834 3,797 3,442 4,596 5,230
PT Indo Premier Sekuritas Net profit 2,334 1,380 1,239 1,989 2,351
andrianto.saputra@ipc.co.id EPS (Rp) 199 118 106 170 200
EPS growth 326.6% -40.9% -10.2% 60.5% 18.2%
+62 21 5088 7168 ext. 712 ROE 20.4% 11.1% 9.5% 14.1% 15.1%
PER (x) 6.8 11.5 12.8 8.0 6.8
EV/EBITDA (x) 8.0 10.9 11.8 8.8 7.7
Lukito Supriadi Dividend yield 3.0% 4.4% 3.7% 3.3% 5.3%
PT Indo Premier Sekuritas Forecast change N/A N/A N/A
IPS vs. consensus 99% 116% 126%
lukito.supriadi@ipc.co.id
Source: Company, Indo Premier Share price closing as of: 11 July 2023
+62 21 5088 7168 ext. 716
Page 36 of 40
11 July 2023
Company Initiation
Japfa Comfeed Indonesia
Fig. 95: JPFA’s financial highlight

2021 2022 2023F 2024F 2025F
Gross sales 69,524 77,133 80,508 85,893 91,240
Net sales 44,878 48,972 51,171 54,434 57,669
Gross profit 8,020 7,683 7,734 9,157 10,083
EBIT* 3,533 2,763 2,407 3,470 4,015
Net profit 2,334 1,380 1,239 1,989 2,351
Margin, %
Gross margin 11.5% 10.0% 9.6% 10.7% 11.1%
EBIT margin 5.1% 3.6% 3.0% 4.0% 4.4%
Net profit margin 3.4% 1.8% 1.5% 2.3% 2.6%
Segm ental
Gross sales
Animal feed 28,366 31,693 34,064 35,531 37,789
DOC 6,895 6,819 5,578 6,444 6,728
Commercial farm 20,361 22,424 23,548 25,372 26,947
Processing food 6,505 7,619 8,229 8,805 9,333
Aquaculture 3,954 4,754 5,090 5,557 6,067
Others 3,443 3,823 3,999 4,184 4,377
EBIT
Animal feed 1,900 2,614 3,370 3,646 4,050
DOC 1,722 1,112 (391) 139 171
Commercial farm (342) (744) (253) 29 157
Processing food 242 239 241 258 274
Aquaculture 202 299 248 266 291
Others 318 306 300 314 328
EBIT m argin
Animal feed 6.7% 8.2% 9.9% 10.3% 10.7%
DOC 25.0% 16.3% -7.0% 2.2% 2.5%
Commercial farm -1.7% -3.3% -1.1% 0.1% 0.6%
Processing food 3.7% 3.1% 2.9% 2.9% 2.9%
Aquaculture 5.1% 6.3% 4.9% 4.8% 4.8%
Others 9.2% 8.0% 7.5% 7.5% 7.5%
*included unallocated opex
Fig. 96: JPFA is traded at 9.7x fwd. 12M PE (or 0.4s.d. below its 5Y mean)
25.0
20.0
15.0
10.0
5.0
-
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Jan-21
Apr-21
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23
JPFA P/E 5-yr mean +1 s.d. +2 s.d. -1 s.d. -2 s.d.
Source: Company, Bloomberg, Indo Premier
Page 37 of 40
11 July 2023
Company Initiation
Income Statement (Rp bn) 2021A 2022A 2023F 2024F 2025F

Net revenue 44,878 48,972 51,171 54,434 57,669
Cost of sales (36,858) (41,289) (43,437) (45,277) (47,586)
Gross profit 8,020 7,683 7,734 9,157 10,083
SG&A Expenses (4,487) (4,920) (5,327) (5,686) (6,068)
Operating profit 3,533 2,763 2,407 3,470 4,015
Net interest (739) (809) (787) (727) (670)
Others 312 (40) 99 17 (83)
Pre-tax income 3,105 1,915 1,719 2,760 3,262
Income tax (663) (464) (416) (668) (790)
Net income 2,334 1,380 1,239 1,989 2,351
Balance Sheet (Rp bn) 2021A 2022A 2023F 2024F 2025F

Cash & equivalent 1,085 1,811 1,652 1,142 822
Receivable 2,429 2,496 2,829 2,981 3,095
Inventory 7,713 9,272 9,008 9,074 9,481
Other current assets 2,934 3,422 3,422 3,422 3,422
Total current assets 14,161 17,001 16,911 16,619 16,820
Fixed assets 11,510 12,497 13,399 14,211 14,933
Other non-current assets 2,763 3,037 3,037 3,037 3,037
Total non-current assets 14,273 15,534 16,436 17,248 17,969
Total assets 28,434 32,535 33,347 33,867 34,789
ST loans 1,315 3,869 3,869 3,869 3,869

Payable 3,030 4,135 4,984 4,917 5,047
Other payables 1,685 691 875 714 510
Current portion of LT loans 1,035 718 718 718 718
Total current liab. 7,064 9,412 10,446 10,217 10,143
Long term loans 7,132 8,426 7,551 6,837 6,327
Other LT liab. 1,291 1,197 1,197 1,197 1,197
Total liabilities 15,487 19,036 19,195 18,252 17,668
Equity 3,136 2,868 2,868 2,868 2,868

Retained earnings 9,098 9,880 10,533 11,996 13,502
Minority interest 869 907 907 907 907
Total SHE + minority int. 13,103 13,655 14,308 15,770 17,277
Total liabilities & equity 28,590 32,691 33,502 34,022 34,945
Page 38 of 40
11 July 2023
Company Initiation
Cash Flow Statement (Rp bn) 2021A 2022A 2023F 2024F 2025F
Net income 3,533 2,763 2,407 3,470 4,015
Depr. & amortization 1,215 950 1,035 1,125 1,215
Changes in working capital (3,452) (522) 781 (285) (391)
Others (1,378) (2,286) (1,168) (1,481) (1,664)
Cash flow from operating (82) 905 3,055 2,829 3,176
Capital expenditure (1,617) (1,937) (1,937) (1,937) (1,937)
Others 272 (118) 0 0 0
Cash flow from investing (1,346) (2,055) (1,937) (1,937) (1,937)
Loans 2,280 2,855 (691) (875) (714)
Equity (405) (324) 0 0 0
Dividends (696) (598) (586) (526) (845)
Others 0 0 0 0 0
Cash flow from financing 1,179 1,933 (1,277) (1,402) (1,559)
Changes in cash (248) 783 (159) (510) (320)
Key Ratios 2021A 2022A 2023F 2024F 2025F

Gross margin 11.5% 10.0% 9.6% 10.7% 11.1%
Operating margin 5.1% 3.6% 3.0% 4.0% 4.4%
Pre-tax margin 4.5% 2.5% 2.1% 3.2% 3.6%
Net margin 3.4% 1.8% 1.5% 2.3% 2.6%
ROA 8.6% 4.5% 3.7% 5.9% 6.8%
ROE 20.4% 11.1% 9.5% 14.1% 15.1%
Acct. receivables TO (days) 17.9 18.4 20.2 20.0 19.6

Acct. receivables - other TO
(days)
Inventory TO (days) 66.3 75.1 75.7 73.1 72.7
Payable TO (days) 34.8 31.7 41.9 39.6 38.7
Acct. payables - other TO (days)
Debt to equity 72.1% 71.5% 62.9% 50.8% 41.8%

Interest coverage ratio (x) -4.4 -3.4 -2.9 -4.4 -5.4
Net gearing 63.2% 57.3% 50.6% 43.1% 36.7%
Page 39 of 40
SECTOR RATINGS
OVERWEIGHT : An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a
positive absolute recommendation
NEUTRAL : A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral
absolute recommendation
UNDERWEIGH : An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a
T negative absolute recommendation
COMPANY RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period
ANALYSTS CERTIFICATION
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the
subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in the report.
DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any
representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness.
Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any
recommendations contained in this document do not have any regard to the specific investment objectives, financial
situation and the particular needs of any specific addressee. This document is not and should not be construed as an
offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT Indo Premier Sekuritas or its
affiliates may seek or will seek investment banking or other business relationships with the companies in this report.

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Poultry OVERWEIGHT

Sector Initiation | Poultry | 11 July 2023

Sector Index Performance

With a lower GPS (Grandparent stock) quota of 600/630k in FY21/22 (vs.

Refer to Important disclosures in the last page of this report

11.5 2017 2022

Fig. 4: Indonesia GPS quota import

730 7.0% 8.0%

590 -7.1% -6.0%

GPS import quota (k birds) yoy growth (RHS)

Source: Minister of Agriculture, Indo Premier

Improving broiler price trend after weakness in 4Q22/1Q23

Fig. 7: Broiler price at producer level (Rp/kg) needs 6-9months to recover

Broiler price (Rp/kg)

Source: Company, Indo Premier

Source: Company, Indo Premier Source: Company, Indo Premier

Despite fluctuation in DOC and broiler prices, commercial farm and

JPFA as FY22 animal feed segment EBIT contributed 80/68% to total

Source: Company, Indo Premier Source: Company, Indo Premier

Source: Company, Indo Premier Source: Company, Indo Premier

Total inter-segment EBIT contribution Total inter-segment EBIT contribution

Source: Company, Indo Premier Source: Company, Indo Premier

Source: Company, Indo Premier Source: Company, Indo Premier

Source: Company, Indo Premier Source: Company, Indo Premier

In terms of share price movement, we observed that the poultry’s P/E

Source: Company, Indo Premier Source: Company, Indo Premier

In terms of valuation, we use PE multiples methodology to derive

Source: KSEI, Indo Premier Source: KSEI, Indo Premier

Fig. 24: Poultry peers comparison

Source: KSEI, Indo Premier Source: KSEI, Indo Premier

Source: KSEI, Indo Premier Source: KSEI, Indo Premier

Source: Euromonitor, Indo Premier Source: Euromonitor, Indo Premier

According to Ministry of Agriculture, Indonesia’s chicken meat consumption

Fig. 33: Indonesia’s DOC production capacity share

CPIN JPFA Cheil Jedang MAIN New Hope Others

Source: Frost & Sullivan, Indo Premier

Source: Company, Indo Premier Source: Company, Indo Premier

Looking into FY23/24F, we estimate Indonesia’s chicken meat production

GPS import quota (k birds) yoy growth (RHS)

Source: Minister of Agriculture, Indo Premier Source: Company, Indo Premier

Fig. 40: Government initiative’s summary in adjusting poultry supply in FY19-23F

Source: Ministry of Agriculture, Company, Indo Premier

Animal feed DOC Commercial farm Processing food Other

Sources: Company, Indo Premier

Fig. 42: JPFA’s consolidated gross sales trend (Rp bn)

Animal Feed DOC Commercial Farm Processing food Aquaculture Others

Sources: Company, Indo Premier

Integrated poultry players

Source: Company, Indo Premier Source: Company, Indo Premier

In addition, CPIN/JPFA’s strategy to increase its internal integration is

Source: Company, Indo Premier Source: Company, Indo Premier

Total inter-segment EBIT contribution Total inter-segment EBIT contribution

Source: Company, Indo Premier Source: Company, Indo Premier

Animal feed segment

Market size (Rp tr) yoy chg

Sources: Euromonitor, Indo Premier

Thus, we can see a weak EBIT margin in 4Q16/3Q17/4Q18-1Q19/4Q21

Fig. 52: Average composition of feed formulation broiler in FY22