Indonesia poultry stocks soaring on supply woes


JAKARTA • Indonesia’s chicken shortage could worsen this year, driving further gains in poultry stocks, according to CGS-CIMB Sekuritas.

The nation’s poultry association projects that the supply of chicks will drop to three billion in 2019 from 3.2 billion last year, after the the government banned the use of antibiotics in chicken feed, analyst Patricia Gabriela wrote in a report. A shortage of chickens has boosted the stock price of poultry producer PT Charoen Pokphand Indonesia (CP Indonesia), which has climbed 2.8% since the start of 2019 after surging 140% last year.

Other poultry companies including PT Malindo Feedmill and PT Japfa Comfeed have also rallied. Shares of Malindo, CIMB’s top stock pick for the industry, have gained 20% this year after rallying 89% in 2018. Japfa has surged 27% so for this year, adding to its gain of 65% in 2018.

CP Indonesia is expected to report a record profit for 2018, with its widest net profit margin in five years, according to analyst estimates compiled by Bloomberg. The price of a day old- chick, known as DOC, gained 42% year-on-year in January, after poultry prices reached all-time high last year, according to Gabriela.

“The higher DOC price reflects its more acute shortage, which we expect to normalise in the third quarter of 2019 (3Q19),” wrote Gabriela, who maintains an ‘Overweight’ recommendation on the industry.

“We expect the sector’s up-cycle momentum to last up to 2Q19.” — Bloomberg