Excerpts from CGSCIMB report Japfa Ltd (SGX: UD2)

• Rising feed costs have impeded JAP’s recovery since 3Q21 when Covid-19 hit key operating markets such as Indonesia and Vietnam.
• However, we see improving ASPs across key proteins, such as poultry and swine, supporting normalised profitability across all business segments.

Japfa profitability has normalised We expect Japfa (JAP) to benefit from a continued recovery in demand for various animal proteins, especially given that key ASEAN economies that JAP operates in, such as Indonesia and Vietnam, are expected to see healthy GDP growth above 5% in 2022. ASPs have also improved to healthier levels that should stave off ongoing cost pressures from high raw material prices for key animal feed ingredients. Our SOP-based TP of S$0.81 is unchanged, although we are cognisant of the six-month validity of the listing application for its China dairy subsidiary, AustAsia Investment Holdings (AIH), on HKEX, which will expire on 29 Sep 22 and needs to be renewed....