JPMorgan initiates Overweight on Indofood Agri with $2.80 target price, implying 19X FY10 P/E, 13X FY11 P/E. Expects share price to be driven by margin expansion as plantation group ramps up sugar business and higher P/E multiples as more palm oil producers get official certification for sustainable planting practices. If strategy for sugar business well executed, contribution to EBITDA could rise to 11% in FY11 from 3% in FY10.
Notes company has plans to plant 20k-25k ha of oil palm this year (+13% on year) and expects a similar trend for the next 2-3 years, which would support mgmt's annual CPO prodn growth expectation of 5%-10%.
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