CGS-CIMB has upgraded its call on industrial agri-food company Japfa : UD2 +9.52% to &ldquo add&rdquo from &ldquo reduce&rdquo , as it now expects the group to report a FY2023 net profit of US$5.8 million, as opposed to its previously forecast US$13.9 million net loss.

 

On Thursday (Nov 2), analyst Tay Wee Kuang noted better pricing dynamics and improved operating expenditure control in the group&rsquo s third-quarter financials.

 

He believes Japfa should remain profitable in Q4 &ndash despite some likely margin pressures &ndash to finish FY2023 in the black.

 

CGS-CIMB&rsquo s target price on the stock was lifted to S$0.28 from S$0.20 to account for higher valuations, as Tay said Japfa&rsquo s share price should rerate after a few consecutive quarters of profit.

 

The research house now values Japfa at 0.5 times price-to-book based on its FY2024 estimates, versus its previous trough valuation of 0.35 times. This stands at about half a standard deviation point below the stock&rsquo s 10-year average.

 

CGS-CIMB raised its FY2024 earnings per share (EPS) estimates by 5.5 per cent, and FY2025 EPS estimates by 7 per cent.

 

&ldquo Although Vietnam swine prices have declined 12.1 per cent in the quarter to date, management shared that better cost efficiencies should continue to put Japfa&rsquo s animal protein others (APO) segment in the black,&rdquo said Tay.

 

&ldquo Nevertheless, we think APO&rsquo s turnaround remains shaky given the uncertain outlook for Vietnam&rsquo s economy.&rdquo

Brokers&rsquo take: CGS-CIMB upgrades Japfa to &lsquo add&rsquo on expected return to the black

CGS-CIMB has upgraded its call on industrial agri-food company  Japfa : UD2 +7.14%  to &ldquo add&rdquo from &ldquo reduce&rdquo , as it now expects the group to report a FY2023 net profit of US$5.8 million, as opposed to its previously forecast US$13.9 million net loss.

On Thursday (Nov 2), analyst Tay Wee Kuang noted better pricing dynamics and improved operating expenditure control in  the group&rsquo s third-quarter financials.

He believes Japfa should remain profitable in Q4 &ndash despite some likely margin pressures &ndash to finish FY2023 in the black.

The research house now values Japfa at 0.5 times price-to-book based on its FY2024 estimates, versus its previous trough valuation of 0.35 times. This stands at about half a standard deviation point below the stock&rsquo s 10-year average.

CGS-CIMB raised its FY2024 earnings per share (EPS) estimates by 5.5 per cent, and FY2025 EPS estimates by 7 per cent.