Coverage Initiation |January 29, 2021

Japfa Comfeed Indonesia Tbk (JPFA)

Take advantage from Japfa’s cycle stock in Ramadhan
during discounted stock price as well as supported by
the recovery of profitability ratio

Chicken consumption per capita in Indonesia tends to be low.

COMPANY RESEARCH Based on data from Central Statistics Agency, the
IN-DEPTH consumption of chicken meat in Indonesia is 12.78 kilograms
per capita per year, which is still much lower than some other
Asian countries. For example, in Malaysia it has reached 38
kilograms per capita per year and Thailand as much as 20
kilograms per capita per year.
ADD
12M Target Price IDR 1,565 The development of poultry market is influenced by public’s
vs. Consensus Price -3% lifestyle or a shift in diet. Currently, animal protein seems to
vs. Last Price +15% be trending in some millennial circles compared to vegetable
protein. On the other hand, chicken is cheaper and halal, so
Stock Data chicken producers actually benefit from Indonesia’s
Ticker Code JPFA population, which is 90% Muslim.
Sector Poultry, Basic Ind
Market Cap (IDR.Tn) 15.95 Japfa’s revenue in 2021 is predicted at IDR 35.03 trillion or
Shares Issued (Bn) 11.73
grow 4.0% compared to 2020Est revenue. On 2nd quarter this
52-Week High (IDR) 3,100
year, it is predicted that meat and processing food demand
52-Week Low (IDR) 760 will reach their top inline with the upcoming Ramadhan and
Eid.

Net Sales 21F (Kiwoom) IDR 35,030 Bn In 2021, Japfa seems to focus more on maintaining their
Vs. (Consensus) -9.8% financial conditions and expected not planning on expanding
aggressively. Japfa’s capital structure in 2021 will experience
a slow growth due to impact from ongoing pandemic in 2020.
Price Performance, YTD (%)
Recommendation “ADD”
JPFA IJ Equity JAKBIND Index Based on Blended valuation (Discounted Cashflow to The Firm
method, EV/Ebitda, P/E), JPFA’s fair value for 12 month target
10%
is at IDR 1,565 per share. JPFA’s fundamental condition still
0%
-10%
need more time to recover from pandemic Covid-19. Even
-20% though, JPFA’s share price still consider undervalue which
-30% make investors may take advantage for investing in this
-40% moment. JPFA is Cycle stock so the stock price tend to increase
-50% in moments like Ramadhan and Eid.
-60%
1/7/2020 7/7/2020 1/7/2021 Figure 1. Financial Highlight
Source : Indonesia Stock Exchange year-end Dec 2018A 2019A 2020F 2021F
Revenue (IDR Bn) 34,013 36,743 33,683 35,030
Sukarno Alatas Net Profit (IDR Bn) 2,168 1,765 327 1,148
sukarno@kiwoom.co.id EPS (IDR) 187.18 150.62 27.91 98.00
EBITDA Margin 14% 11% 8% 10%
NPM 6% 5% 1% 3%
ROE 21.22% 15.42% 2.80% 9.23%
P/E (x) 11.49 10.19 52.49 15.99
EV/EBITDA (x) 6.20 6.17 9.75 7.73
Source: Bloomberg and Kiwoom Research

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 Coverage Initiation |January 29, 2021

Industry Overview
Figure 2. Stock Market return vs GDP 2020 Outlook vs GDP 2021F
5.00

3.00
China
X: Stock Return (Jan-Nov) 8.10
1.00
South Korea -1.00
-19.00 -14.00 -9.00 -4.00 1.00 6.00 11.00 16.00 3.20 21.00

Y: GDP 2020 Outlook

Indonesia
4.00 Turkey
Australia U.S.A 4.50
-3.00
Rusia
3.00 3.80
3.00 Brazil
3.50 Germany Japan -5.00
3.90 2.50
-7.00
Italia South Africa
France 5.40 Mexico 3.20 Saudi Arabia -9.00
6.20 3.50 3.20 Bubble Size: GDP 2021F
United Kingdom
5.30
Argentina -11.00
4.30
-13.00

-15.00
Source: Bloomberg and Kiwoom Research

Figure 3. Industrial Production (YoY %)

China Eurozone U.S. India Japan SA South Korea

15.0
10.0
5.0
-
(5.0)
(10.0)
(15.0)
(20.0)
(25.0)
2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q4
Source: Bloomberg and Kiwoom Research

I. Economic in the G20 Countries are Showing Recovery

The economy in G20 countries in the third quarter of 2020 have mostly
started to improve compared to the second quarter. In the 3rd quarter,
several countries began loosening their activities and allow shopping
centers to operate. On the other hand, public transport has started to
crowd the roads, this reflects that economy is gradually recovering,
although it can not be said to be normal.

Economic conditions in 2021 is estimated to be able exiting the

recession zone and it is assumed that world economy will grow by 4%
and Indonesia’s economy grow around 3.5-4.5%. Global economic
performance in 2021 is estimated to be in recovery inline with the
easing of Covid-19 pandemic outbreak, although the impact on global
financial sector still need to be cautious.

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II. Indonesia Poultry Market at Glance

Chicken consumption per capita in Indonesia tends to be low. Based on
data from Central Statistics Agency, the consumption of chicken meat
in Indonesia is 12.78 kilograms per capita per year, which is still much
lower than some other Asian countries. For example, in Malaysia it has
reached 38 kilograms per capita per year and Thailand as much as 20
kilograms per capita per year.

Since January-October 2020, chicken production has been in an

oversupply condition so that the selling price of chickens has
decreased. Chicken production in Indonesia reaches 3 million tons,
while Indonesia's needs are 2.2 million tons.

Animal feed industry will start improving with the hope in 2021 that
restaurant and hotel will recover. Even though, Day Old Chicken (DOC)
is little bit oversupply. Other than that, the risk of imported broiler
chicken may threaten this business. Broiler Chicken Surplus May Persist
Through 2022.

III. Opportunity and trend for Indonesia’s Poultry Market

• Poultry is a major source of animal protein due to the religious ban
on eating pork for almost 90% of the country’s Muslim population.
Furthermore, beef, goat and mutton, and dairy products of the like,
have to be imported in large quantities and are too expensive for
many locals.
• The development of the livestock market is also influenced by the
lifestyle of the community or a shift in diet. Currently, animal
protein seems to be trending in some millennial circles compared
to vegetable protein. On the other hand, the development of
technology and information causes the diet in other countries to
tend to be adopted by other countries as well.
• The Indonesian government is supporting to increase chicken
consumption per capita through Chicken Eating Movement
(GEMAYA: Gerakan Makan Ayam) campaign, this is expected to
encourage the chicken meat market to be more developed in the
future.
• The low level of consumption of animal protein in Indonesia and
the government's appeal to reduce stunting.

Figure 4. Population vs Per Capital Consumption (Kilogram)

Indonesia Population Per Capita Consumption

280 277 16
275
275 15
272
270 14
270 267 14
13 13
264 13
265 12
12 12
12
260 11
255 10
2018A 2019P 2020P 2021P 2022P 2023P
Source: Secretariat General of the Ministry of Agriculture, Bloomberg

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 Coverage Initiation |January 29, 2021

IV. The impact of Covid-19 on poultry market

Sales of processed chicken in the midst of a pandemic have actually
increased due to stay at home policy, many families have chosen to buy
ready-to-eat food. Although the demand for processed chicken meat
has increased, the industry still has many challenges. Industrial
conditions that are at risk of oversupply allow the live bird selling price
to be moderate or in bad scenario will even tend to fall in 2021.

Currently, breeders expect further intervention from government to

control production through an extension of policies to carry out
Cutting Hatching Egg (HE) and early abandonment on Parent Stock
(PS). This regulation issued in August 2020 has proven effective in
reducing supply and increasing prices in the market.

From 2019 through October 2020, the average monthly live bird price
dipped below 18,500 rupiah per kilogram 11 times, resulting in a gross
segment loss in 2019 of 1.2 trillion rupiah ($ 85 million) and a
potentially even wider loss in 2020 due to Covid-19.

The risk for poultry market during pandemic

The risk of spreading on new mutated virus is feared to have the
potential to cause a lockdown in some countries. Chicken demand for
the hotel and restaurant sector may return to full challenges if the
lockdown is carried out again.

The margins of the poultry feed industry depend on corn price and
corn supply conditions.
High corn prices have a negative impact on the poultry feed business.
Based on report on the calculation of the Center for Data and
Information Systems of the Ministry of Agriculture, the national corn
planting area for October 2019-September 2020 reached 5.5 million
hectares (ha). The national corn harvest area from January to
December 2020 reaches 5.16 million ha. Indonesia’s government is
committed to increase corn production. Following are the 10 regions as
the largest corn producers in Indonesia (in the figure below).

Figure 5. Corn Harvested Area (Year: 2020) Figure 6. Corn Harvest (Year: 2020)

South Sumatera 137.0 000 Ha 000,000 tons

South Sumatera 0.80
North Sulawesi 235.5 North Sulawesi 0.92
West Java 206.7 West Java 1.34
West Nusa Tenggara 283.0 West Nusa Tenggara 1.66
South Sulawesi 377.7 South Sulawesi 1.82
North Sumatera 350.6 North Sumatera 1.83
Lampung 474.9 Lampung 2.83
Central Java 614.3 Central Java 3.18
East Java 1,190.0 East Java 5.37

Source: Bloomberg and Kiwoom Research Source: Bloomberg and Kiwoom Research

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Company Overview
Japfa Comfeed Indonesia Tbk (JPFA) is protein producer (poultry &
beef), this company started since 1975. Japfa’s raw material is from
team up with farmers at the upstream of the supply chain.
Majority of the corn that Japfa buy is from local farmers. Product
& Service that Japfa owned divided become 3 segments, which
are Poultry, Aquaculture, and Beef Cattle.

1. Poultry
a. Poultry feed d. Farm Supply
b. DOC Broiler/ Layer & Pullets e. Commercial Live Broiler
c. Customer & Technical Service Birds
f. Processed Chicken
2. Aquaculture
g. Disease Prevention
a. Aquafeed d. Eel
b. Breeding e. Japfa Prime
c. Tilapia Seafood
3. Beef Cattle
a. Live Cattle
b. Tokusen
c. Santori Blue

Figure 7. Revenue Breakdown : Full Year, Recent Quarter

Trading
100% Cattle
90%
Aquaculture
80%
Day Old Chick
70%
60% Animal Feeds
50%
40%
30% Commercial
Farm &
20% Consumer
10% Products

0%
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 9M20
Source: JPFA and Kiwoom Research

Figure 8. Shareholders Composition (effective 31 Dec 2020)

Treasury
Stock,
Public, 0.59%
44.94% Kepemilikan saham oleh direktur
Ir. Bambang Hendarto Assist. Director 0.88%
Handojo Santoso CEO 0.54%
Japfa Ltd , Leo Handoko Laksono Director 0.02%
54.47% Tan Yong Nang Director 0.00%
Ir Rachmat Indrajaya Director 0.00%

Source: JPFA and Kiwoom Research

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 Coverage Initiation |January 29, 2021

Japfa’s Business Model consists of upstream which from poultry feed,

midstream from breeding and commercial farm, and the last one
Downstream from processing food. Japfa produced feed poultry as well
as breeding in various areas in Indonesia, with the majority produced
in Java followed by Sumatra, Kalimantan and Bali.

Figure 9. JAPFA Operational Area

• Poultry Feedmills • Corn Dryer • Fish Farming and Hatcheries

Medan (2), Padang, Lampung,
Cikande, Tangerang,
Purwakarta, Cirebon, Sragen,
Grobogan, Sidoarjo,
Gedangan, Surabaya,
Banjarmasin, Makassar.
• Slaughterhouse
Medan, Lampung, Parung
(Bogor), Sadang (Purwakarta),
Pabelan (Salatiga), Bali,
Makassar, Yogyakarta, Krian
(Sidoarjo), Bati-Bati
(Banjarmasin), Magelang.
• Aquaculture Research Center :
Cianjur, Banyuwangi
Source: JPFA and Kiwoom Research
Lampung, Brebes, Grobogan,
Gowa, Parepare.
• Beef Cattle Feedlot
Lampung, Probolinggo.
• Aqua Feedmills
Medan, Lampung,
Purwakarta, Gresik,
Banyuwangi.
• Shrimp Ponds and Hatcheries
• Bireun Pidie Jaya-Aceh,
Canti-Lampung, Carita,
Anyer, Indramayu,
Situbondo, Banyuwangi,
Singaraja-Bali, Negara-Bali,
Sumbawa, dan Makassar
Tigaras dan Tambun Raya
(Danau Toba-Simalungun),
Tanah Jawa-Simalungun,
Cianjur, Purwakarta, Sleman,
Banjar dan Tanah Laut (Kalsel).
• Fish and Shrimp Processing
Unit
Janggir Leto-Simalungun,
Cirebon.
• Eel Farming : Banyuwangi,
Situbondo
• Eel Processing : Banyuwangi
• Aqua Feedmills : Wonoayu-
Sidoarjo
• Animal Vaccine Factory :
Gunung Putri Bogor

Figure 10. Business Structure

UPSTREAM MIDSTREAM DOWNSTREAM

COMMERCIAL PROCESSING
FEED BREEDING
FARM Food
Aquaculture Poultry

Source: JPFA and Kiwoom Research

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 Coverage Initiation |January 29, 2021

So Good Food (SGF) Acquisition

SGF Acquisition is company’s strategic move in expanding its
downstream business which with enlarging processed meat production
facility’s capacity and increasing marketing and direct sales on
processed products to customers. The transfer of rights over shares
from Jupiter and Annona as the Sellers to the Company and Ciomas as
the Buyers will effectively occur on November 30, 2020 (or other date
as agreed by the Seller and the Buyer in writing).

This acquisition activity is affiliated transactions with value reaching IDR

1.21 trillion and not included in material transaction due to only 10.6%
from Japfa’s total equity.

Figure 11. Japfa’s Advantages

SGF has wide connection on

marketing , which include Has technology on R&D
distribution with traditional Products
and modern market.

Has brand that public already Has applied B2B live poultry
famliar with policy

Source: JPFA and Kiwoom Research

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 Coverage Initiation |January 29, 2021

Financial Overview
Japfa’s majority revenue is contributed from Commercial farm &
consumer products at 44%, then come from Animal feed at 31%,
Aquaculture 10%, Day Old Chick 7%, Trading 4% and Cattle 4%.

On 9M 2020 period, Total Japfa’s revenue decreased by 9% YoY with

Gross Profit down by 13% YoY, Operating Income down by 49% YoY and
Net Income decreased by 75% compared to the same period on 2019.
Cost per revenue ratio is increasing on COGS per Revenue become 84%
from 83%, Selling & Marketing per Revenue become 4% from 3%,
General & Adm. per Revenue become 9% from 8%.

Figure 13. Revenue Breakdown

Figure 12. Revenue Breakdown
9M18 9M19 9M20
Aquaculture , 10%

Animal Day Old

Feeds Chick , 7%
31%
Trading , 4%
Commercial Farm
& Consumer Cattle , 4% Animal Day Old Cattle Grains
Products Feeds Commercial Chick Aquaculture Farm Trading
Farm &
44% Consumer
Products
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

Figure 14. Profitability Ratio Figure 15. Highlight Income Statement

22%
9M18 9M19 9M20

GPM (%) 30,000

in Billions IDR

17% 25,000
16%
15%
OPM (%) 20,000
12%
10% 15,000
8% EBITDA Margin
7% 10,000 1,672 1,043
7% (%)
4% 4% 5,000 257
NPM (%)
1% -
Revenue Gross Operating EBITDA Net
9M18 9M19 9M20
Profit Income Income
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

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 Coverage Initiation |January 29, 2021

In 3rd quarter performance, majority of the performance recovering

with recording growth quarter to quarter (%)

Figure 16. Animal Feed (LHS) & Growth (%) (LHS) Figure 17. Farm, Cons Products (LHS) & Growth (%) (RHS)
Animal Feeds Growth (%) Commercial Farm & Consumer Products
4,000 15% Growth (%)
3,500 10% 5,000 30%
in Billions IDR

in Billions IDR
5%
3,000 4,000 20%
0%
2,500 -5%
2,000 -10% 3,000 10%
1,500 -15%
2,000 0%
-20%
1,000
-25% 1,000 -10%
500 -30%
- -35% - -20%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
18 18 18 18 19 19 19 19 20 20 20 18 18 18 18 19 19 19 19 20 20 20
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

Figure 18. Day Old Chick (LHS) & Growth (%) (RHS) Figure 19. Aquaculture (LHS) & Growth (%) (RHS)

Day Old Chick Growth (%) Aquaculture Growth (%)

1,000 30% 1,000 20%

in Billions IDR
in Blillions IDR

20% 15%
800 800
10%
10%
600 600 5%
0%
400 400 0%
-10% -5%
200 -20% 200
-10%
- -30% - -15%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
18 18 18 18 19 19 19 19 20 20 20 18 18 18 18 19 19 19 19 20 20 20
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

Figure 20. Cattle Farm (LHS) & Growth (%) (RHS) Figure 21. Grains Trading (LHS) & Growth (%) (RHS)
Cattle Farm Growth (%) Grains Trading Growth (%)

600 100% 450 50%

in Blillions IDR

80% 400 40%

500
in Blillions IDR

60% 350 30%

400 300 20%
40%
250 10%
300 20%
200 0%
0%
200 150 -10%
-20%
100 100 -20%
-40% 50 -30%
- -60% - -40%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
18 18 18 18 19 19 19 19 20 20 20 18 18 18 18 19 19 19 19 20 20 20
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

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 Coverage Initiation |January 29, 2021

Profitability ratio back showing recovery and Liquidity ratio still in

safe level (Still Healthy).

Figure 22. Profitability Ratio Figure 23. Liquidity & Solvability Ratio
2Q-2020 3Q-2020 2Q-2020 3Q-2020
Gross Profit Margin 15% 16% Quick ratio 0.55x 0.63x
Operating Profit Margin 0% 5% Current ratio 1.73x 1.84x
EBITDA Margin 5% 9% Cash ratio 28% 31%
Net Profit Margin -2% 1% Debt to Assets 0.59x 0.58x
Return on Assets -0.7% 0.4% Debt to Equity 1.45x 1.36x
Return on Equity -1.7% 0.9% L-Debt to Equity 0.61x 0.61x
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

Figure 24. Margin Ratio Figure 25. ROA & ROE

GPM (%) OPM (%) ROA (%) ROE (%)
EBITDA Margin (%) NPM (%)
30% 8.0%
25%
6.0%
20%
4.0%
15%
2.0%
10%
5% 0.0%

0% -2.0%
-5% -4.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
17 17 17 17 18 18 18 18 19 19 19 19 20 20 20 17 17 17 17 18 18 18 18 19 19 19 19 20 20 20
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

Figure 26. Liquidity Ratio

Figure 27. Debt Ratio
Quick R (x) Current R (x) Cash R (%) DER (x) DAR (x)

3.00 80% 1.60

2.50 70% 1.40
60% 1.20
2.00 50% 1.00
1.50 40% 0.80
1.00 30% 0.60
20% 0.40
0.50 10% 0.20
- 0% -
Q1 17
Q2 17
Q3 17
Q4 17
Q1 18
Q2 18
Q3 18
Q4 18
Q1 19
Q2 19
Q3 19
Q4 19
Q1 20
Q2 20
Q3 20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
17 17 17 17 18 18 18 18 19 19 19 19 20 20 20
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

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Financial Forecasting
Japfa’s revenue in 2021 is expected at IDR 35.03 trillion or grow by 4.0%
compared to 2020’s revenue estimation. On 2nd Quarter this year, meat
and processing food demand is predicted to reach the top relate with
higher demand during Ramadhan and Eid.

On the other side, broiler chicken and beef demand are expected to
recover this year, event though still below normal conditions. Chicken
products demand will fulfill F&B needs in restaurant & hotel will
depend on how government controlling infection rates as well as PPKM
policy. The result is expected that poultry product demand will be
moderate this year.

The tighter the activity restrictions, the lower the demand for poultry
products.

Profitability ratio for 2021 is expected to start becoming stable but

still below normal condition. Net Profit Ratio for 2021 is expected grow
3% higher compared to 2020 but still lower when compared to 2019
which is 5%.

Figure 28. Financial Position Statement (Bn.IDR)

Revenue Gross profit EBITDA Net income

40,000 36,743 35,731

33,683 35,030
35,000
30,000
25,000
20,000
15,000
10,000
4,158 2,718 3,494 3,921
5,000 1,765 327 1,148 1,320
-
2019A 2020F 2021F 2022F
Source: JPFA and Kiwoom Research

Figure 29. Profitability Ratio (%)

Gross margin (%) EBITDA margin (%)
Net margin (%) ROE (%)
25% ROA (%)

20%

15%

10%

5%

0%
2019A 2020F 2021F 2022F
Source: JPFA and Kiwoom Research

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Japfa’s financial position and capital structure in 2021 will slowdown as

impact from the ongoing pandemic in 2020. In 2020, Japfa's cash and
cash equivalents experienced an increase in funding activities with a
net debt of IDR 2.4 trillion in the 3rd quarter of 2020 amidst low
expenditure realization.

In 2021, Japfa seems to focus more on maintaining their financial

conditions and expected not planning on expanding aggressively.
Japfa’s capital structure in 2021, we estimated around IDR 1.7 trillion,
this figure is higher compared to the estimated Capex allocation for
2020, but still lower compared to capex allocation on normal condition.

Covid-19 infection conditions still ongoing in 2021, this is expected

become challenges for growth in poultry industry that will be growing
stagnant in single digit below 5% as expected inline with domestic
economic condition.

Figure 30. Liquidity Ratio Figure 31. Cash Flow Activities (Bn.IDR)
Current ratio (x) Acid ratio (x) Operating CF Investing CF
120% Gearing (%) 2.00 3,000 Financing CF Ending CF
2,000
100%
1.50 1,000
80%
-
60% 1.00
(1,000)
40% (2,000)
0.50
20% (3,000)

0% - (4,000)
2019A 2020F 2021F 2022F 2019A 2020F 2021F 2022F
Source: JPFA and Kiwoom Research
Source: JPFA and Kiwoom Research

Figure 32. Balance Sheet Position (Bn.IDR) Figure 33. Debt Ratio
DAR (x) LT D/Equity (x) DER (x)
Cash and equivalents Total liabilities
0.58 2.50
20,000 35%
30%
0.56 2.00
30%
15,000 25% 0.54
19% 1.50
20% 0.52
10,000 13% 14%
15% 1.00
0.50
5,000 10%
0.48 0.50
5%
- 0% 0.46 -
2019A 2020F 2021F 2022F 2019A 2020F 2021F 2022F
Source: JPFA and Kiwoom Research Source: JPFA and Kiwoom Research

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The Calculation of JPFA’s Valuation

Based on blended valuation method: Discounted Cashflow to The Firm,
EV/EBITDA & PE. JPFA’s fair value for 12 month target is at IDR 1,565
per share.

Even though, JPFA’s share price still consider undervalue which make
investors may take advantage for investing in this moment. JAPFA is
Cycle stock so the stock price tend to increase in moments like
Ramadhan and Eid.
Figure 34. Valuation
Base The Value of the
Blended Valuation Target Multiple Value Weight (%)
Amount firm
DCF 22,287 22,287 30% 6,686
EV/EBITDA 3,494 6.5 22,711 30% 6,813
PE 1,148 10.6 12,174 40% 4,869
Total Value (Mn) 18,369
Share (Mn) 12
DCF Calculation assumption Target Price 1,565
Cost of Equity 11.00% Current Price 1,360
Cost of Debt 7.36% Potential Upside (%) 15%
WACC 9.0%
Term. Growth 0.5%
Tax (%) 34.16%
Capex (1,752)
Beta 1.6
Cash 2021F IDR Bn 1,482
Debt 2021F IDR Bn 15,193
Value Bn 22,287
Source: Bloomberg and Kiwoom Research

Kiwoom Sekuritas Guide to Investment Ratings

OVERWEIGHT : Stock Return > +15% over the next 12 month (excluding dividend)
ADD : Stock Return, range between +10% to +15% over the next 12 month (excluding dividend)
NEUTRAL : Stock Return, range between -10% to +10% over the next 12 month (excluding dividend)
REDUCE : Stock Return, range between -10% to -15% over the next 12 month (excluding dividend)
UNDERWEIGHT : Stock Return > -15% over the next 12 month (excluding dividend)

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Figure 35. Blended Forward P/E

21

16

STD +2

11 STD +1

AVG

6 STD -1

STD -2

1
1/19/2016 1/19/2017 1/19/2018 1/19/2019 1/19/2020 1/19/2021

Source: Bloomberg and Kiwoom Research

Figure 36. Blended Forward EV/EBITDA

10

6 STD +2

STD +1
5
AVG
4
STD -1
3
1/19/2016 1/19/2017 1/19/2018 1/19/2019 1/19/2020 STD -2
1/19/2021

Source: Bloomberg and Kiwoom Research

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 Coverage Initiation |January 29, 2021

Financial Statement Figure 37. Financial Statement

Year–end 31 Dec
(IDR Bn) 2019A 2020F 2021F 2022F
Company profile Revenue 36,743 33,683 35,030 35,731
Japfa Comfeed Indonesia Tbk (JPFA) is protein Costs of revenue 29,617 28,167 28,725 28,942
producer (poultry & beef), this company Gross profit 7,126 5,516 6,305 6,789
Operating profit 3,141 1,321 2,531 2,889
started since 1975.
Interest income 169 60 111 89
Interest expense 689 801 745 805
Summary of assumptions
EBITDA 4,158 2,718 3,494 3,921
1. Economic conditions in 2021 is Income before tax 2,573 524 1,839 2,113
estimated to be able exiting the Tax expenses 689 175 613 705
recession zone and it is assumed that Minority interests 119 22 77 89
world economy will grow by 4% and Net income 1,765 327 1,148 1,320
Indonesia’s economy grow around 3.5- EPS (IDR) 151 28 98 113
4.5%.
Balance Sheet
2. Animal feed industry will start 2019A 2020F 2021F 2022F
(IDR.Bn)
improving with the hope in 2021 Cash and equivalents 938 2,141 1,482 1,025
that restaurant and hotel will Account receivables 1,968 1,804 1,946 1,985
recover. Even though, Day Old Inventories 8,829 8,637 9,075 8,271
Chicken (DOC) is little bit
Fixed assets 10,907 11,441 12,094 12,496
oversupply.
Other assets 2,543 2,983 3,041 2,889
3. JPFA’s revenue in 2021 is expected to
Total assets 25,185 27,006 27,637 26,667
improve but normalization to level
S-T liabilities 3,125 4,545 3,901 3,310
before Covid or Pre-Covid is in 2023.
Other S-T liabilities 3,909 2,660 3,815 3,860
Key Risks L-T liabilities 5,497 6,914 6,222 4,978
1. The risk of spreading on new mutated Other L-T liabilities 1,206 1,218 1,254 1,291
virus is feared to have the potential to Total liabilities 13,737 15,336 15,193 13,439
cause a lockdown in some countries. If Equity 11,448 11,670 12,445 13,227
this happens then the economy and BVPS (IDR) 977 996 1,062 1,129
manufacturing activity may be Cash Flow
2019A 2020F 2021F 2022F
depressed again. (IDR.Bn)
2. Industry condition still risk for Net Income 1,765 327 1,148 1,320
Depreciation 1,017 1,397 963 1,032
oversupply and there is tendency that
Change in W/C (890) (210) 47 (315)
live bird price will be moderate or the
CFO 1,892 1,514 2,158 2,037
worst scenario, the price tend to drop in Capital expenditure (3,034) (1,516) (1,752) (1,608)
2021. Others (123) (79) 56 (170)
3. The risk of imported broiler chicken may CFI (3,158) (1,595) (1,696) (1,778)
threaten this business. Broiler Chicken Dividend paid 1,471 - (82) (230)
Surplus May Persist Through 2022 Net change in debt 573 2,836 (1,335) (1,835)
Others (811) (1,502) 407 1,137
CFF 1,233 1,334 (1,010) (928)
Foreign Exc. Rates (26) (5) 23 (13)
Change in cash (149) 1,204 (660) (457)
Beginning 1,087 938 2,141 1,482
Ending cash flow 938 2,141 1,482 1,025

Key Ratios 2019A 2020F 2021F 2022F

Gross margin (%) 19% 16% 18% 19%
EBITDA margin (%) 11% 8% 10% 11%
Pretax margin (%) 9% 4% 7% 8%
Net margin (%) 7% 2% 5% 6%
ROE (%) 15% 3% 9% 10%
Current ratio (x) 1.73 1.85 1.72 1.66
Gearing (%) 0.48 0.66 0.54 0.51
Net gearing (%) 75% 98% 81% 63%
AR turnover (days) 120% 131% 122% 102%
ITO (days) 19.6 19.6 20.3 20.3
AP turnover (days) 108.8 111.9 115.3 104.3
Source: JPFA & Kiwoom Research

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 Coverage Initiation |January 29, 2021

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