Thailand's Charoen Pokphand anticipates higher earnings

Charoen Pokphand Foods (CPF) 2010-12 earnings are revised up by 7.9%, 8.0% and 8.5% to reflect the strong broiler price, the boost to shrimp exports from the Gulf of Mexico oil spill and a better gross margin.

 

DDM-based fair price is revised up to THB22.5 (US$0.70) per share. Buy rating is reiterated.

 

CPF's earnings in 2Q10 are expected to break THB4 billion (US$124 million) due to high product prices, while earnings in 2010 are expected to be flat on-year.

 

The investment theme for CPF next year will change from being an earnings growth story to one based on its strong fundamentals and attractive valuation.

 

We see more upside to CPF's earnings than downside risk in 2010 and 2011. Raw chicken meat exports to Japan (if approved by the Japanese government) may be the upside story. Meanwhile, the risk from falling meat prices and rising raw material costs is limited.