PT Charoen Pokphand Indonesia Tbk (CPIN) is one of the leading issuers in the consumer non-cyclical sector, especially the food and beverage industry. With a market capitalization of IDR 79 trillion, CPIN remains a major player in Indonesia’s poultry industry. However, how will this stock perform ahead of 2025? Is this a good time to BUY? Let’s dig deeper.

Q3 2024 Performance: Sluggish, But Still Promising?

On a quarterly basis, CPIN’s revenue in Q3 2024 decreased by 1.7% QoQ to Rp16.76 trillion. Although the Feed segment grew by double digits by 14.2% QoQ and the Day-Old-Chickens (DOC) segment increased by 18.9% QoQ, total revenue was still held back by weakening:

• Broiler Segment (-9.2% QoQ)
• Processed Chicken Segment (-1.9% QoQ)
• Other Segments (-7% QoQ)

If we look at year-on-year (YoY), CPIN still recorded growth of 3.2%, mainly driven by:

• Broiler segment growth of 8.2% YoY
• Processed Chicken segment increased by 7.1% YoY
• DOC which grew by 1.8% YoY

However, the Feed and Other segments actually weakened by -4.8% YoY and -27.9% YoY, respectively. This indicates that there is a considerable dependence on the Broiler and Processed Chicken segments to support the company’s revenue.

Q4 2024: Potential Revival?

History records that CPIN’s performance in the fourth quarter is often under pressure, such as in 4Q22 which fell by -9% QoQ and 4Q23 which fell deeper by -11% QoQ. However, historically, the fourth quarter has had an average +3% QoQ growth in the last 12 years. Then, is there a chance of a revival in Q4 2024?

Some of the factors that could be a positive catalyst for CPIN in Q4 2024 are:

• Government Free Lunch Program: CPIN’s involvement in this program could result in large business contracts from the government.
• Seasonal momentum: Typically, the demand for processed chicken increases towards the end of the year.
• Increased demand from the food industry sector: Increasing consumption of processed foods in Indonesia has the potential to drive CPIN sales.

Based on this analysis, we estimate that Q4 2024 could experience revenue growth of 9.92% QoQ to Rp18.42 trillion.

Cash Flow & Finance: Beware of Costs

Operationally, CPIN’s cash flow in the first 9 months of 2024 is under pressure. Operating cash flow decreased 17.22% YoY to Rp2.07 trillion, despite an increase in cash from customers of 6.12% YoY. Unfortunately, the costs incurred for suppliers increased even higher, namely 10.41% YoY.

In addition, CPIN’s investment activity also slowed down with a decrease of -29.42% YoY to IDR 703.34 billion. Meanwhile, cash flow from funding activities entered the negative zone due to a surge in short-term debt payments that almost doubled, reaching Rp5.23 trillion (+83.33% YoY). This indicates that CPIN needs to be careful in managing debt and investment in the future.

Conclusion: Are CPIN Shares Worth Buying?

Looking at the various factors above, we still recommend BUY with a target price of IDR 5,550, which provides a potential upside of 15%. The valuation is currently at a P/E of 29.4x, still below the average P/E for the next 3 years of 31.5x.

However, there are some risks to watch out for:

• Government budget uncertainty: Will the free lunch program continue or not?
• Threat of avian influenza (H5N1) and HMPV outbreaks: If cases increase, it could have an impact on chicken consumption.
• Fluctuations in feed raw material prices: The price of corn and soybeans can affect profit margins.

In conclusion, CPIN is still one of the leading stocks in the food and beverage sector. With fairly strong fundamentals, as well as bright prospects in 2025, this stock is worth collecting for long-term investors.

Reference ((CPIN_Pre-4Q24 _NHKS_Company_Report_(English)_1736215190244))