Charoen Pokphand Foods (CPF) – In-Depth Stock Analysis and 2025 Outlook
Date: January 27, 2025
Broker: UOB Kay Hian
Overview of Charoen Pokphand Foods (CPF)
Charoen Pokphand Foods (CPF), Thailand’s leading agro-industrial conglomerate, plays a pivotal role in feed, farm, and food processing. Operating under the Consumer Staples sector, CPF’s financial and operational performance has been detailed extensively in the latest report by UOB Kay Hian.
The report maintains a BUY recommendation on CPF stock, with a target price of Bt31.00, reflecting an impressive upside of 40.9% from its current trading price of Bt22.20.
2024 Performance Insights
CPF’s Q4 2024 performance is projected to be subdued, with core earnings expected to reach Bt3.8 billion, marking a 38% quarter-on-quarter decline. Despite this, the company showed resilience, with a net profit of Bt4.3 billion, a significant improvement from Bt120 million in Q4 2023.
Key Challenges in Q4 2024:
- Lower gross profit margin of 14.3%, compared to 15.4% in Q3 2024, due to weaker domestic chicken prices and Vietnamese swine prices.
- An increase in SG&A-to-sales ratio to 9.2% from 8.8% quarter-on-quarter, driven by lower sales.
- A decline in China swine prices from Rmb19.6/kg in Q3 2024 to Rmb16.8/kg in Q4 2024, impacting profits.
Financial Performance and Ratios
CPF’s financial metrics reflect the challenges and recovery trajectory:
| Metric |
2023 |
2024F |
2025F |
2026F |
| Net Turnover (Bt million) |
585,844 |
585,354 |
599,516 |
614,050 |
| EBITDA (Bt million) |
30,447 |
57,518 |
55,457 |
54,020 |
| Net Profit Margin (%) |
-0.9 |
3.7 |
3.4 |
3.5 |
| Debt to Equity (%) |
200.3 |
179.6 |
165.5 |
151.8 |
2025 Outlook: Positive Momentum
Despite a challenging 2024, CPF is poised for a strong recovery in 2025. Key drivers include:
- Vietnamese Swine Prices: Expected to rise significantly due to the African Swine Fever (ASF) outbreak in Vietnam.
- Lower Raw Material Costs: A decline in soybean meal and corn costs is anticipated, boosting margins.
- Higher Domestic Meat Prices: An improvement in meat prices is projected, fueled by reduced swine supply and increased demand.
- Divestment of Loss-Making Companies: CPF’s strategic divestment in 2024 is expected to yield positive results in 2025.
Risks and Challenges
While the outlook for 2025 is optimistic, CPF faces potential risks:
- US Pork Imports: Pressure from the US for Thailand to open its pork market could impact local farm operators.
- Market Volatility: Fluctuations in meat and raw material prices remain a concern.
Valuation and Recommendation
The report maintains a BUY recommendation for CPF, with a target price of Bt31.00. This valuation is based on the 2025 core EPS of Bt2.20 and a forward PE ratio of 14.0x, aligned with CPF’s five-year mean, excluding periods of livestock price anomalies. Analysts expect swine prices in Thailand and Vietnam to sustain their positive trend in 2025.
Environmental, Social, and Governance (ESG) Commitments
CPF has demonstrated strong commitments to ESG principles:
- Environmental: CPF aims to achieve net-zero emissions by 2050, with interim goals to reduce greenhouse gas emissions from land use and fossil fuels by 30.3% and 42%, respectively, by 2030.
- Social: The company invests in personnel development through lifelong learning and fostering an innovative organizational culture.
- Governance: CPF adheres to excellent corporate governance practices, receiving top ratings from the Thai Institute of Directors.
Stock Catalysts
Potential catalysts for CPF’s stock performance include:
- Rising swine prices in China.
- Recovery in domestic swine and chicken prices in Q1 2025.
- Declining raw material prices.
