BAF – A pick-me-up in volatile time – Initiation

• We think BAF is well-positioned to ride on the growing local demand of clean, traceable and affordable meat.
• Earnings is expected to grow 22.4%-10.2% yoy over FY23-24F on the back of its strong expansion in farming and processing.
• Initiate coverage with Add rating and target price of VND33,500.

A rising star in Feed-Farm-Food (3F) business

Established in 2017, BAF initially involved in agri-products trading then strongly tapped into 3F business through several M&A since 2020. Currently, BAF focuses in porker value chain with two animal feed factories and 15 farms with over 200,000 pig heads, among top 5 largest swine farming companies in Vietnam. In 2021, BAF delivered almost its volume for meat processing companies, eg Masan MeatLife.

Ambitious capacity expansion during FY22-23F

BAF aims to get about 10% live hog market share by 2030F, equivalent to c. VND14,000bn of revenue. During FY22-23F, the company enter a heavy investment cycle with 2 slaughter factories, 5 porker farms, 2 piglet farms and 3 combined piglet and porker farms which will come online since 3Q22F – 1Q23F. These projects will lift BAF ‘s pig herd up 226% from current scale and also finalize its “Food” segment in 3F business model. Trailing the success of CP Food and Masan Meatlife, BAF will benefit from rising demand of clean and traceable meat.

Strong earnings growth over FY23-24F backed by Food segment expansion

BAF experienced softer growths of both topline and bottom-line as the company narrowed down agri-products trading business. An inflection point to be coming in FY23 as 3F business revenue to grow 54.0% yoy, contribute 35.8% to total revenue. GM will improve 0.7% pts as 3F business segment increase its contribution to BAF’s gross profit by 6.1% pts in FY23F. Overall, BAF’s net profit is forecasted to rise 22.4% yoy in FY23F, then grow steadily from FY24F after a strong growth period FY21-23F of 10.2% you.

Initiate coverage with Add rating and target price of VND33,500

BAF‘s share price has corrected 31.5% from its peak on 25 May, following the market overall performance, bringing its valuation to 9.1x FY23F P/E. We see BAF as a relatively defensive pick with visible earnings growth (16.2% over FY23-24F) and encouraging profitability (ROE >15%) among the rising cost-push inflation and tightening capital market. Potential re-rating catalysts include 1) higher–than–expected demand for meat products, and 2) higher–than–expected live hog price. Downside risks include 1) lower-than-expected meat consumption in Vietnam, 2) slower-than-expected expansion of Siba Food stores, and 3) the prices of key animal food rising faster than expected.

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