Poultry issuers growing

January 23, 2017, 10.08 AM  | Reporter: Narita Indrastiti
Poultry issuers growing


JAKARTA. Animal feed and poultry issuers are still facing some challenges in this year. However, the shares of animal feed and poultry issuers are still worth to collect.

The performance of poultry issuers were affected by Minister of Agriculture Regulation No. 61/2016 on the provision, distribution, and monitoring of broilers. This regulation will control the production and distribution of day old chicken (DOC) and broilers.

Director of Investa Saran Mandiri Hans Kwee said that the policy will make the price of DOC become more stable. “There was oversupply. But the price tends to be more stable in this year,” Hans said, Sunday (22/1).

Analyst at NH Korindo Securities Indonesia Joni Wintarja on a research dated 18 January 2017 said, the government regulation will control the price volatility, as well as prevent the oversupply in the market.

Analyst at Mirae Asset Sekuritas Indonesia Mimi Halimin said that the government tries to ensure the balance between demands and supplies of chickens in the markets. However, the price capping of DOC will limit the profit margin so that it will be a burden for animal feed companies.

The prospect of animal feed issuers will be also affected by the prices of raw materials and rupiah exchange rate against the US dollar. Analyst at MNC Securities Yosua Zishoki said that the poultry business would be affected with the plan on banning of maize import. “This will affected to the scarcity of raw materials,” Yosua said.

Yosua added that the government’s plan to determine chicken price will also affect to the performance of poultry’s issuers. However, the prospect of poultry issuers remains positive, thanks to the growing Indonesia’s economy.

According to Hans, rupiah exchange rate will tend to be more stable, despite of The Fed’s plan to increase the fund rate. “The markets will be adapting with Trump’s economic policy. But we estimate that the rupiah exchange rate will still be under control,” he said.

Mimi predicts that the increase in The Fed’s fund rate in this year will be a catalyst that makes the US dollar exchange rate becomes volatile so that will suppress the performance of poultry sector. “Exchange rate movement is essential enough for this sector,” Mimi added.

Mimi downgraded the recommendation of poultry sector from ‘overweight’ to ‘neutral’, due to the uncertainties, which were caused by government interventions in the price of COD, rupiah volatility, and the potential pressures from sluggish purchasing power.

Joni estimates, one of animal feed issuers that will have positive prospect in this year is PT Japfa Comfeed Indonesia Tbk (JPFA). According to Joni, about 44% of JPFA revenues were derived from animal feed business. This business contributed to the total profits of JPFA.

Joni estimates that JPFA revenues in this year may increase by 12% compared with the last year to Rp 31.06 trillion, while the profits may increase by 14% to Rp 2.6 trillion. Joni recommends ‘buy’ for JPFA shares with the price target of Rp 2,400 per a share.

Hans favors the shares of PT Charoen Pokphand Indonesia (CPIN), which has large domestic market share. Hans recommends ‘buy’ for CPIN and JPFA shares with the price target of Rp 4,200 and Rp 2,200 per a share, respectively.

Yosua recommends ‘buy’ for CPIN and JPFA shares with the price targets of Rp 4,000 and Rp 1,800 per a share, respectively. “Both have large market shares in Indonesia, with integrated business lines,” Yosua said. (Muhammad Farid/Translator)

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