CPF forecasts 2010 earnings up 10%

Thailand's Charoen Pokphand Foods Plc (CPF) expects to generate sales growth of about 10% year-on-year (YoY) in 2010 thanks to higher volumes in its processed food and overseas businesses.

Earnings growth should also be supported by a sustained strong gross margin. Buy rating is maintained with an upgraded TP of THB18.70 based on its sustained operating margins and improving earnings visibility.

The main earnings driver in 2010F should be CPF's high-margin processed food business, particularly its shrimp and overseas feed operations. Its margins will be stable YoY thanks to its fully-integrated closed systems, higher yields and selling prices and stable costs.

2010 sales revenue estimate was revised up by 5% to THB179 billion and gross margin assumption to 17.5% from 16.6% previously.

This upgrade reflects upward revisions to gross margin forecasts for its processed cooked chicken exports, processed cooked shrimp exports and its broiler business in Turkey.

Additionally, 2010 net profit forecast were revised up by 18% to THB11.69 billion and 2011-12 targets were lifted by a similar percentage.

Earlier, the company announced an investment of THB2 billion (US$61.8 million) to build an integrated ready-meal production plant to produce a wide range of product lines including egg noodles and sausages.