GFPT PCL: 3QFY17 results seen less than previously thought October 20, 2017

3QFY17 profit seen at Bt511mn, up a meager 3% y‐y and 3% q‐q: Our 3QFY17 earnings preview suggests GFPT’s results may come in weaker than previously thought in the wake of sales misses in both livestock and aquaculture feed businesses and a likely drop in share of profit from affiliates to a mere Bt86mn from Bt108mn in the previous quarter as a result of sagging profit at GFN hurt by lower by‐product prices and flagging profit at McKey Food Services hit by additional costs from its new plant. We estimate GFPT will report a 3QFY17 profit of Bt511mn, up a measly 3% y‐y and 3% q‐q. For the quarter, sales are expected to hold flat at Bt4,419mn as a modest increase in export sales offsets ebbing feed sales but margins tend to stay at high levels helped by the benefit of lower raw material prices and rising food sales.

FY17 profit cut likely on softer‐than‐expected feed sales outlook: Even though the benefit of lower raw material prices should keep margins at high levels, the raft of negative headwinds including a seasonal drop in export volume in 4Q, a slump in meat prices heading into the annual 9‐day Vegetarian Festival and a softer‐than expected outlook for feed sales may give us a reason to place our FY17‐FY18 profit forecasts for GFPT under review for possible downgrades.

 ‘ACCUMULATE’ rating with Bt21.20/share target price: In the near term, we feel the market may be disappointed by its 3QFY17 results which could come in softer than previously envisaged. We now have a less positive view of GFPT with scope for FY17‐FY18 profit downgrades. However, we leave our ‘ACCUMULATE’ rating for GFPT unchanged with a FY18 target price of Bt21.20/share for the meantime.

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