Petrafoods

Petrafoods: CIMB maintains Underperform with TP $2.04. Note that Indonesia’s grinding capacity is expected to jump 43% in 2012 on new installations. House cut FY12-14 EPS on lower margin assumptions, lowering target price (15x CY13 P/E, 7-year mean). Maintain Underperform with de-rating catalysts expected from earnings disappointments. House believe an influx of new cocoa-grinding capacity in Indonesia over 2012-13 will stiffen competition and erode the margins of processors. Add that there has been a flurry of downstream investments in Indonesia from domestic and international players following an imposition of export taxes on cocoa beans, aimed at encouraging value-added downstream production. Overall, see risks to consensus forecasts, believing the Street has yet to fully appreciate the severity of the supply onslaught in 2012-13. House FY12-14 profit forecasts are now 8-14% below consensus.