Th

22 JANUARY 2014

BUY

(Unchanged)

TP: Bt 15.50
Upside: 13.2%

(From: Bt 15.00)

Change in Numbers

an Ta hc ah na r c th A ad rt H A o dc H R o e c se Ra ers ce h ar ch

GFPT Public Co Ltd

(GFPT TB)

Still bucking the trend

GFPTs share price has bucked the trend and outperformed the SET by 59% since October last year. We see the outperformance continuing as we expect a sharp earnings turnaround to hit a new record high in 2014F with a 11x PE multiple. Also, we dont believe GFPT is exposed to the current political strife and we reiterate our BUY rating.

KALVALEE THONGSOMAUNG
662 617 4900 kalvalee.tho@thanachartsec.co.th

Record-high earnings on way with 11x PE

GFPT remains our top pick for a food turnaround play as we view its valuation as cheap and we anticipate strong earnings catalysts this year. Its earnings turnaround started in 2Q13 and we forecast record-high earnings of Bt1.57bn, or 17% growth, in 2014. Meanwhile, GFPTs 2014F PE still looks low to us at 11.0x versus its 10-year average forward PE of 12.4x and its peak in 2011 of 17.0x. We see key earnings drivers kicking in at the same time, i.e. recovered domestic chicken prices, lower raw material costs, more capacity and a fatter margin. We reiterate our BUY call on GFPT with a new 12-month DCF TP of Bt15.5/share, implying a PE multiple of 12.4x.

COMPANY VALUATION
Y/E Dec (Bt m) Sales Net profit Consensus NP Diff frm cons (%) Norm profit Prev. Norm profit Chg frm prev (%) Norm EPS (Bt) Norm EPS grw (%) Norm PE (x) EV/EBITDA (x) P/BV (x) Div yield (%) ROE (%) Net D/E (%) 2012A 15,370 41 2013F 15,891 1,343 1,335 0.5 1,343 1,343 0.0 1.1 2014F 17,605 1,567 1,426 9.9 1,567 1,513 3.5 1.2 16.7 11.0 8.7 2.2 2.7 21.6 37.1 2015F 18,477 1,679 1,563 7.4 1,679 1,658 1.3 1.3 7.1 10.2 7.9 1.9 3.4 20.0 21.0

41

Chicken prices look sustainable

The chicken price YTD has been higher than wed expected at Bt46/kg and we raise our 2014 assumption to Bt45/kg from Bt42/kg. We maintain our long-term price forecast of Bt42/kg. We see this price level (versus the low of Bt35.6kg in 1Q12 and the high of Bt47.5kg in 2Q13) as being sustainable. The price is being supported by an easing of the severe oversupply situation in 2012, Europe lifting its ban on Thai raw chicken imports in July 2013 and the rescinding of Japans ban on Thai raw chicken imports in December 2013. We dont expect a sharp increase in raw chicken exports despite the end of Japans ban but rather a gradual recovery in market share that has been lost to Brazilian chicken producers since 2005. The Thai Department of Livestock expects 100,000 tonnes of Thai raw chicken to be exported to Japan in 2014 versus over 200,000 tonnes p.a. before the ban in 2005.

0.03

(96.6) 3,188.6 420.7 25.6 3.1 0.0 0.7 97.7 12.8 10.6 2.6 2.3 22.0 54.9

PRICE PERFORMANCE
(Bt/shr) 16 14 12 10 8 6 Jan-13 May-13 Sep-13 GFPT Rel to SET Index (%) 80 60 40 20 0 (20) (40) Jan-14

Margin expansion
We see GFPTs margin fattening in 2014 from continued downward pressure on corn and soybean prices (GFPTs raw materials). The latest USDA report on 10 January 2014 estimates 2014 global corn and soybean production to increase by 30% and 8% resulting in higher ending stocks, particularly for corn. The corn price is now being quoted at the lowest level for the past three years because of larger crops, especially from South America (Brazil and Argentina are major global exporters). We therefore lift our 2014 gross margin assumption for GFPT from 14.1% to 14.3%.

COMPANY INFORMATION
Price as of 21-Jan-14 (Bt) Market cap (US$ m) Listed shares (m shares) Free float (%) Avg daily turnover (US$ m) 12M price H/L (Bt) Sector Major shareholder 13.70 522.7 1,253.8 45.1 1.3 13.8/7.3 AGRI Sirimongkolkasem family 53%

Fine-tune up earnings
We fine-tune up our 2014-15F earnings by 1-4% to reflect our assumptions of: 1) higher domestic chicken prices, 2) fatter gross margin given downward pressure on GFPTs raw material prices, 3) our expectation for the baht to weaken against the US dollar to Bt33.6/US$ from Bt32.4 in 2014 and Bt34.0/US$ from Bt33.0 in 2015. We have already factored GFPTs planned broiler farm capacity expansion of 10% in 2014 and an additional production line installed at 49%-owned GFN in mid-2013 that is already running at full capacity. The plan isnt firm yet but we see upside lying with a possible new production line at GFN in 2H14 boosting capacity by around 20%.

Sources: Bloomberg, Company data, Thanachart estimates

This report is prepared by Thanachart Securities. Please contact our salesperson for authorisation. Please see the important notice on the back page.

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Thanachart Ad Hoc Research

Record-high earnings on way with inexpensive PE

We forecast record-high earnings in 2014 with an inexpensive PE of 11x GFPT Pcl (GFPT) remains our top pick for a food turnaround play as we view its valuation as inexpensive and we anticipate strong earnings catalysts this year. Earnings started turning around in 2Q13 because of highly profitable chicken prices and strengthened further in 3Q13 on the back of lower raw material prices. As a result, GFPTs share price has bucked the trend and outperformed the Stock Exchange of Thailand (SET) Index by 59% since October last year. We see that outperformance continuing as we expect a sharp turnaround in earnings to hit a record high in 2014F while it trades at 11x PE multiple. Also, we dont believe GFPT is exposed to the domestic political strife. We reiterate our BUY rating. Our key reasons for keeping our BUY call on GFPT are as follows: Current PE still below its 10year historical average 1) Still trading at an inexpensive valuation. We view GFPTs 2014F PE multiple as still low at 11.0x versus its 10-year average forward PE of 12.4x and its peak in 2011 of 17.0x while we forecast GFPT to offer record-high earnings of Bt1.57bn or 17% growth in 2014.

Ex 1: We Forecast Record High Earnings In 2014

(Bt m) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2008 2009 2010 2011 2012 2013F 2014F 2015F
Sources: Company data, Thanachart estimates

Ex 2: GFPT Is Trading Below Its 10-Yr Average PE

(Bt/share) 25 20 15 10 5 Ten-year average forward PE of 12.4x 17x 14x 11x 8x 5x 2x
2013F 2014F 2015F 2005 2006 2007 2008 2009 2010 2011 2012

1,567 1,166 1,203 1,343

1,679

1,076 1,068

41

Sources: Company data, Bloomberg

2) Chicken prices and low raw material costs look sustainable

We see profitable chicken price as being more sustainable

We see the domestic chicken price as more sustainable with the price being supported by an easing of the severe oversupply situation in 2012 because of the good news over the lifting of the import ban on Thai raw chicken imports to Europe in July 2013 and to Japan in December 2013 and the ongoing supply cut at Saha Farms (previously Thailands largest chicken producer and exporter) which began in 2Q13. We raise our 2014 assumption to Bt45/kg from Bt42/kg and maintain our long-term price forecast of Bt42/kg. Regarding the lifting of Japans import ban on Thai raw chicken, we do not expect a sharp increase in raw chicken exports but rather a gradual recovery of market share that has been lost to Brazilian chicken producers since 2005. The Thai Department of Livestock expects 100,000 tonnes of Thai raw chicken to be exported to Japan in 2014 in comparison with more than 200,000 tonnes p.a. before the ban was imposed in 2005. Note that GFPT has focused on exporting processed chicken products (legs, breasts, fillets and wings). We do not expect GFPT to enjoy a significant increase in selling export volumes of raw chicken to Japan. However, since its by-products left over from exports are sold domestically, we expect GFPTs by-product sales to enjoy the highly profitable domestic chicken prices.

End of Japans import ban on Thai raw chicken helps push up the domestic price

GFPT is therefore enjoying profitable domestic chicken prices

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22 JANUARY 2014

Thanachart Ad Hoc Research

Lower raw material costs support GFPTs margin

Given that corn accounts for 50% of GFPTs feed costs while soybean meal comprises 30%, we expect GFPTs margin to fatten in 2014 on the continued downward pressure on corn and soybean prices. The corn price is now being quoted at the lowest level for the past three years given larger crops, especially from major global exporters Brazil and Argentina. The latest report from the USDA on 10 January 2014 forecasts 2014 global corn and soybean production to rise by 30% and 8%, resulting in higher ending stocks.

Ex 3: Profitable Domestic Chicken Prices

(Bt/kg) 60 55 50 45 40 35 30 25 20

Ex 4: Corn Price Has Been Trending Down

(Bt/kg) 13 12 11 10 9 8
Corn (LHS) Soybean meal (RHS)

(Bt/kg) 24 22 20 18 16 14 12 10

Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14

7
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13
Source: Bloomberg

Source: Office of Agricultural Economics

3) Our earnings forecasts are fine-tuned upward We expect strong earnings catalysts this year so we lift 2014-15F earnings

We fine-tune up our 2014-15 earnings forecasts by 1-4% to reflect our higher domestic chicken price assumptions, our expectation for gross margin to fatten given the downward pressure on GFPTs raw material prices, and also because we project the baht to weaken against the US dollar (see our forex assumptions in Exhibit 7). We expect GFPT to boost its export selling volume by 8-10% by seeking new customers. GFPT became one of the suppliers to McDonalds in Malaysia this month. Moreover, we have already factored GFPTs planned broiler farm capacity expansion of 10% in 2014 and an additional production line installed at 49%-owned GFN in mid-2013 that is already running at full capacity. We see upside to our earnings forecasts from a possible new production line at GFN in 2H14 potentially adding around 20% to its capacity.

Ex 5: 2014F Revenue By Business Segment

Processed food 5% Farm (to GFN) 20% Day-old chicks 4% Chicken processing 42%

Ex 6: 2014F Revenue By Destination

Exports 35%

Feed 29%
Source: Thanachart estimates Source: Thanachart estimates

Domestic 65%

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Thanachart Ad Hoc Research

Ex 7: Key Assumption Revisions And Earnings Changes

2013F Broiler price (Bt/kg) New Old Change (%) Gross margin (%) New Old Change (%) Normalized profit (Bt m) New Old Change (%)
Source: Thanachart estimates

2014F

2015F

42.0 42.0

45.0 42.0 7.1

42.0 42.0

13.2 13.2

14.3 14.1 1.8

14.3 14.2 0.7

1,343 1,343

1,567 1,513 3.5

1,679 1,658 1.3

Ex 8: GFPTs Major Shareholders

Sirimongkolkasem family 52.8% Thai NVDR 4.7%

Ex 9: GFPTs Board Of Directors

GFPTs board of directors comprises nine members and includes three independent directors. There are six members from the family. The board has set up four committees, namely: 1) audit and risk management, 2) nomination,
Nichirei Foods INC. 4.5%

remuneration and corporate governance, 3) code of conduct, and 4) executive committee.

Others 37.9%
Source: Company data Source: Company data

Ex 10: 12-month DCF-based TP Calculation

Terminal (Bt m) EBITDA Free cash flow PV of free cash flow 2013F 1,965 1,629 2014F 2,316 924 921 2015F 2,420 1,152 976 2016F 2,495 1,177 917 2017F 2,513 1,188 852 2018F 2,572 1,407 928 2019F 2,599 1,427 866 2020F 2,697 1,619 903 2021F 2,791 1,912 982 2022F 2,912 2,042 965 2023F 2,866 1,964 854 2024F 2,988 2,165 866 Value 33,032 13,208

Risk-free rate (%) Market risk premium (%) Beta WACC (%) Terminal growth (%) Enterprise value - add investments Net debt (end-2013F) Minority interest Equity value # of shares Target price/share

4.5 8.0 0.7 8.8 2.0

23,236 3,717 80 19,439 1,254 15.50

Sources: Company data, Thanachart estimates

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Thanachart Ad Hoc Research

COMPANY DESCRIPTION
GFPT Pcl (GFPT) operates feed, farm, and food businesses. It produces frozen chicken parts and distributes its products under the GFPT and its subsidiaries GFN and McKey Food core brand names. The company sells its products in both the domestic and export markets.

COMPANY RATING
Financial management

Rating Scale
Very Strong
Risk manage ment

Manage ment

5 4 3 2 1 0

5 4 3 2 1 0

Strong Good Fair

Liquidit y

*Corp. governa nce

Weak None

Source: Thanachart

Sources: Thanachart; *CG Awards

THANACHARTS SWOT ANALYSIS S Strength Fully integrated chicken processor. Economies of scale. W Weakness Chicken prices are volatile. Raw material prices, e.g. corn and soybean meal also fluctuate a lot.

O Opportunity Growth opportunities in processed foods. Growth opportunities in overseas markets.

T Threat Unexpected disease outbreaks. Oversupply of chicken. Trade barriers in overseas markets.

CONSENSUS COMPARISON
Consensus Thanachart Target price (Bt) Net profit 13F (Bt m) Net profit 14F (Bt m) Consensus REC 15.00 1,335 1,426 BUY: 11 15.50 1,343 1,567 HOLD: 1 Diff 3% 1% 10% SELL: 1

RISKS TO OUR INVESTMENT CASE

Unexpected and volatile global weather and crop yields. Unexpected disease outbreaks causing consumers to avoid broiler chicken would result in an oversupply of chicken and present downside risk to our volume growth and price assumptions.

HOW ARE WE DIFFERENT FROM THE STREET?

Any new trade barriers in international markets could hinder our growth assumptions.

We forecast strong earnings momentum in 2014 as we expect highly profitable chicken prices and low raw material costs to result in margin expansion.

Sources: Bloomberg consensus, Thanachart

Source: Thanachart

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Thanachart Ad Hoc Research

FINANCIAL SUMMARY
Incom e State m e nt
FY ending Dec (Bt m) Sales Cost of sales Gro ss pro fit SG&A Operat ing pro fit Depre & amortization EB IT D A Other income Other expenses Interest expense Pre-tax profit Income tax After-tax profit Equity income M inority interests Extraordinary items N ET P R OF IT N o rmalized pro fit EPS (Bt) Normalized EPS (Bt) (consolidated) Quar te rly Earnings (consolidated)

2011A 2012A
1 4,21 0 1 1 ,985 2,224 900 1,324 822 2,146 223 0 (1 36) 1 ,41 1 77 1 ,334 (1 1 1 ) (1 9) 0 1,203 1,203 1 .0 1 .0 1 5,370 1 4,374 996 1 ,005 (10) 895 885 281 0 (1 47) 1 24 1 1 24 (74) (8) 0 41 41 0.03 0.03

2013F
1 5,891 1 3,791 2,100 1 ,033 1,067 898 1,965 270 0 (1 67) 1 ,1 70 58 1 ,1 1 1 238 (7) 0 1,343 1,343 1 .1 1 .1

2014F
1 7,605 1 5,083 2,522 1 ,1 44 1,378 938 2,316 299 0 (1 96) 1 ,481 1 56 1 ,326 248 (7) 0 1,567 1,567 1 .2 1 .2

2015F
1 8,477 Sales 1 5,831 Cost of sales 2,646 1,445 2,420 Gro ss pro fit Operating pro fit EB IT D A 1 ,201 SG&A 975 Depre & amortization 31 4 Other income 0 Other expenses (1 48) Interest expense 1 ,61 1 Pre-tax profit 1 93 Income tax 1 ,41 8 After-tax profit 268 Equity income (7) M inority interests 0 Extraordinary items 1,679 N ET P R OF IT 1,679 N o rmalized pro fit 1 .3 EPS (Bt) 1 .3 Normalized EPS (Bt)

3Q12
3,876 3,665 211 269 (58) 231 173 66 0 (39) (30) (27) (3) 6 (1 ) 0 2 2 0.0 0.0

4Q12
4,260 3,947 313 248 65 230 295 94 0 (41 ) 1 1 8 47 71 (21 ) (2) 0 47 47 0.0 0.0

1Q13
3,836 3,51 6 319 252 68 21 8 286 67 0 (51 ) 84 1 9 65 29 (1 ) 36 130 94 0.1 0.1

2Q13
4,083 3,631 452 261 191 21 3 404 48 0 (48) 1 91 (8) 1 99 63 (3) 43 302 259 0.2 0.2

3Q13
4,376 3,580 797 264 533 232 765 47 0 (43) 536 1 536 78 (6) 0 607 607 0.5 0.5

Balance She e t
FY ending Dec (Bt m) Cash & equivalent A/C receivables Inventories Other current assets Investment Fixed assets Other assets T o tal assets S-T debt A/C payables Other current liabilities L-T debt Other liabilities T o tal liabilities M inority interest Shareho lders' equity Working capital Total debt Net debt Free cash flow Year End Shares (m)

(consolidated) Financial Ratios And V aluations

2011A 2012A
1 79 848 2,81 6 5 630 4,933 658 10,068 746 633 48 2,240 41 7 4,084 65 5,919 3,031 2,986 2,807 374 1 ,254 283 1 ,003 4,21 2 6 1 ,429 5,225 71 0 12,869 3,61 3 1 ,033 1 0 2,1 60 434 7,249 73 5,546 4,1 82 5,773 5,490 (1 ,537) 1 ,254

2013F
350 958 3,400 6 1 ,529 5,1 30 734 12,109 976 793 32 3,091 449 5,341 80 6,688 3,565 4,067 3,71 7 1 ,972 1 ,254

2014F
350 1 ,061 3,71 9 7 1 ,629 4,995 81 4 12,575 788 868 23 2,495 497 4,671 87 7,818 3,91 2 3,283 2,933 1 ,344 1 ,254

2015F
300 Norm profit (y-y%) 1 ,1 1 4 Normalized EPS (%) 3,904 Net profit (y-y%) 8 EPS (%) 1 ,729 Dividend payout (%) 4,823 854 Gross margin (%) 12,731 Operating margin (%) EBITDA margin (%) 530 Net margin (%) 91 1 31 ROA (%) 1 ,677 ROE (%) 522 Net D/E (x) 3,670 Norm PE (x) 94 Norm PE at TP (x) 8,968 PE (x) EV/EBITDA (x) 4,1 06 P/BV (x) 2,206 Dividend yield (%) 1 ,906 1 ,666 BV/share (Bt) 1 ,254 DPS (Bt)

2011A 2012A
3.2 3.2 3.2 3.2 34.4 1 5.7 9.3 1 5.1 9.4 1 2.5 21 .4 0.5 1 4.3 1 6.2 1 4.3 9.3 2.9 2.4 4.7 0.3 (96.6) (96.6) (96.6) (96.6) 0.0 6.5 (0.1 ) 5.8 0.8 0.4 0.7 1 .0 420.7 476.1 420.7 25.6 3.1 0.0 4.4 0.0

2013F 2014F 2015F

3,1 88.6 3,1 88.6 3,1 88.6 3,1 88.6 30.0 1 3.2 6.7 1 2.4 7.0 1 0.8 22.0 0.5 1 2.8 1 4.5 1 2.8 1 0.6 2.6 2.3 5.3 0.3 1 6.7 1 6.7 1 6.7 1 6.7 30.0 1 4.3 7.8 1 3.2 7.5 1 2.7 21 .6 0.4 1 1 .0 1 2.4 1 1 .0 8.7 2.2 2.7 6.2 0.4 7.1 7.1 7.1 7.1 35.0 1 4.3 7.8 1 3.1 7.7 1 3.3 20.0 0.2 1 0.2 1 1 .6 1 0.2 7.9 1 .9 3.4 7.2 0.5

Sources: Company data, Thanachart estimates

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General Disclaimers And Disclosures:

This report is prepared and issued by Thanachart Securities Public Company Limited (TNS) as a resource only for clients of TNS, Thanachart Capital Public Company Limited (TCAP) and its group companies. Copyright Thanachart Securities Public Company Limited. All rights reserved. The report may not be reproduced in whole or in part or delivered to other persons without our written consent. This report is prepared by analysts who are employed by the research department of TNS. While the information is from sources believed to be reliable, neither the information nor the forecasts shall be taken as a representation or warranty for which TNS or TCAP or its group companies or any of their employees incur any responsibility. This report is provided to you for informational purposes only and it is not, and is not to be construed as, an offer or an invitation to make an offer to sell or buy any securities. Neither TNS, TCAP nor its group companies accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The information and opinions contained herein have been compiled or arrived at from sources believed reliable. However, TNS, TCAP and its group companies make no representation or warranty, express or implied, as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. The use of any information, forecasts and opinions contained in this report shall be at the sole discretion and risk of the user. TNS, TCAP and its group companies perform and seek to perform business with companies covered in this report. TNS, TCAP, its group companies, their employees and directors may have positions and financial interest in securities mentioned in this report. TNS, TCAP or its group companies may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned in this report. Therefore, investors should be aware of conflict of interest that may affect the objectivity of this report.

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Recommendation Structure: Recommendations are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 10% or more, the recommendation is BUY. If the downside is 10% or more, the recommendation is SELL. For stocks where the upside or downside is less than 10%, the recommendation is HOLD. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal recommendation. For sectors, we look at two areas, ie, the sector outlook and the sector weighting. For the sector outlook, an arrow pointing up, or the word Positive, is used when we see the industry trend improving. An arrow pointing down, or the word Negative, is used when we see the industry trend deteriorating. A double-tipped horizontal arrow, or the word Unchanged, is used when the industry trend does not look as if it will alter. The industry trend view is our top-down perspective on the industry rather than a bottom-up interpretation from the stocks we cover. An Overweight sector weighting is used when we have BUYs on majority of the stocks under our coverage by market cap. Underweight is used when we have SELLs on majority of the stocks we cover by market cap. Neutral is used when there are relatively equal weightings of BUYs and SELLs.

Thanachart Securities Pcl. Research Team 28 Floor, Siam Tower Unit A1 989 Rama 1, Pathumwan Road, Bangkok 10330 Tel: 662 617-4900 Email: research@thanachartsec.co.th

Pimpaka Nichgaroon, CFA Head of Research Economics & Strategy pimpaka.nic@thanachartsec.co.th Sarachada Sornsong Banks, Telecom sarachada.sor@thanachartsec.co.th Phannarai Tiyapittayarut Property, Retail phannarai.von@thanachartsec.co.th

Supanna Suwankird Energy, Utilities supanna.suw@thanachartsec.co.th

Siriporn Arunothai Ad Hoc Research, Healthcare siriporn.aru@thanachartsec.co.th

Saksid Phadthananarak Construction, Transportation saksid.pha@thanachartsec.co.th Kalvalee Thongsomaung Food, Hotel, Media kalvalee.tho@thanachartsec.co.th

Noppadol Pririyawut Senior Technical Analyst noppadol.pri@thanachartsec.co.th Adisak Phupiphathirungul, CFA Retail Market Strategy adisak.phu@thanachartsec.co.th

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