Cairo Poultry Company (CPC) POUL.

CA

Egypt | Food and Beverage Sector | Initiation of Coverage

Tuesday, July 18, 2023

Market price: Fair value: Potential Capital Gains: Rating: Ibrahim Adel
Equity Analyst
EGP 5.03/Share EGP 8.22/Share 63% Buy 0233008600 (510)
[Link]@[Link]
I. Conclusion and Recommendation

• A Market Leader in Poultry Sector with a High Degree of Vertical

Integration Relative Performance 5years
10 20,000
• The Company is Set to Benefit from Egypt’s Pending Plan to Ban 8
18,000
16,000
Transport of Live Birds 14,000
6 12,000
10,000
• The Company is Set to Benefit from Adopting Contracting 4 8,000
6,000
Farming for Feed Crops in Egypt (e.g. soya bean, yellow corn, 2 4,000
sun flower etc) 0
2,000
-

01/05/2018

01/09/2020

01/01/2023
01/01/2017
01/05/2017
01/09/2017
01/01/2018

01/09/2018
01/01/2019
01/05/2019
01/09/2019
01/01/2020
01/05/2020

01/01/2021
01/05/2021
01/09/2021
01/01/2022
01/05/2022
01/09/2022

01/05/2023
• The Company’s Feed Production Will Lead Growth as it Serves
Poultry, Meat and Fish Production in Egypt
[Link] , LHS EGX30 , RHS

• The Company is Set to Benefit from Egypt’s Plan to Cut Imports

Stock details
and to Achieve Self-sufficiency in feed, poultry and meat Reuters code [Link]
production Last price (EGP) 5.03
52-Week High 5.91
• The Company Has a Robust Business Model that Extends from 52-Week Low 2.16
Feed Production to Poultry Production to Poultry Processing All Time Highest Price (EGP/share) 9.16
All Time Lowest Price (EGP/share) 0.65
Outstanding Shares (mn) 479
• The Company Has a Large and Growing Market Shares in Market Cap (EGP mn) 2409
Egypt’s Feed & Poultry Local and Whole Sale Markets as Well as 3M Average Trading Volume (mn) 30.5
Export Markets Beta 0.80
Free Float (%) 47%
• Recent Events such as Russia-Ukraine War, Several
Key Financial Indicators (FY2022)
Depreciations in the Egyptian Pound, Egypt’s High Dependence
GPM (%) 13%
on Importing Feed Raw Materials and Shortage in Foreign NPM (%) 5%
Currency have Changed the Feed and Poultry Market structure EBIT Margin (%) 9%
EPS EGP (FY2022) 0.62
from fragmented with a low pricing power to concentrated with a P/E Trailing (x) 8.2x
strong pricing power P/E leading (x) 3.35x
ROAA 9%
ROAE 20%
• The Company’s Share is Currently Trading at a Market Price of EV/Sales 0.30
EGP 5.03 Implying a 63% Discount Compared to Estimated Fair EV/EBITDA 1.87
Value at EGP 8.22/Share Mkt Cap/CFO 8.05

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

In this report, Faisal Islamic Brokerage Research used a five-

year Discount Cash Flow Model which resulted in a fair value of 47%
EGP 8.22/share for Cairo Poultry ([Link]), thus implying a
potential capital gains of 63% above the current market price
which is EGP 5.03/share as on this report date. Accordingly, we
Shareholder
recommend buying the stock. The model assumed a variable
Structure
WACC from 25.9% to 26.6% throughout the forecasted period,
the beta was estimated at 0.80 and a terminal growth rate of 3%
has been used. In fact, a major part of our forecast assumptions 53%
regarding the company’s financial results from 2023 to 2027
were in line with the Company’s disclosed forecasts (see
valuation part in this report). However, we have assumed that Americana Holding for Egypt Food LTD
the company’s feed production will increase from 165k tons in
FY2022 to 600k tons in FY2027, noting that the company’s total Free Float
annual designed capacity in feed division amounts to 0.7mn
tons. Also, we have assumed that the company’s feed division’s
contribution to the company’s total annual revenues will
increase from 28% in FY2022 to 48% in FY2027. In this report,
we assumed that the company will cease importing raw
materials for feed division altogether as it will rely on securing
the required soya bean and yellow corn inputs by entering into
contracts to receive the crops from the local farmers under the
new contracting agriculture system. Also, in this report we have
forecasted that the company’s broilers and processing
segment’s contribution to the company’s total annual revenues
will decline from 31% and 34% respectively in FY2022 to 28%
and 21%, respectively in FY2027.

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

ii. Company Overview: Poultry Division: With operations spanning grandparent

Established in 1977, CPC is Egypt's leading poultry & parent farms, hatcheries and broiler farms, CPC is the
producer and specializes in two main areas: poultry market leader and key supplier of the Egyptian poultry
operations and poultry feed. The company is listed on the market, in addition to its own operations.
Cairo stock exchange. The main shareholder in CPC is It’s inputs is (feed from operation and grandparent ODO
Americana Holding Company for Foods Limited, which is chicks), and it has 7 grandparent farms with capacity of
a subsidiary of Adeptio AD Holdings Company (the final 3.2mn parent chicks/year, 22 parent farm with capacity of
owner), which owns through Americana 53.45% of the 780k parent chicks/year , 4 Hatcheries with capacity of
capital of CPC. It is involved in the production of poultry 85mn broiler chicks/year and 42 broiler farms with
compound feed and concentrates, the production of capacity of 38mn birds/year .
broilers (chickens for roasting), chicken processing This division produce (parent chicks, broiler chicks and
(including slaughtering and freezing) and other value- live birds ) to the end customer (Parent/Broiler Farms,
added processed product ranges. It currently has two Live Bird Traders, Chick Distributors and Processing
large slaughtering facilities, three main feed production Division)
facilities and seven farms, hatcheries and production
Processing division
facilities in the country, as well as a network of 11 retail
outlets. Its export markets include the UAE, Kuwait, CPC produces a diverse mix of processed chicken and
Bahrain, Qatar, Oman and Saudi Arabia. beef foods under its flagship brand, Koki at its 2 state-of-
the-art processing facilities and sells them both wholesale
iii. Business Model: and retail through 11 Koki outlets. In 2021, the Group
released its premium brand, Koki Gold.
Company’s operations span the entire value chain, from
poultry feed to processing, providing the Company with The inputs is (live birds , fresh/ frozen beef and seafood) ,
the flexibility to alter its product mix in response to and CPC has 2 Slaughterhouses with capacity of 72mn
changing market conditions and maximize its profit birds/year , and has 1 Value-Added Production Facility
margins. It also enables CPC to ensure quality throughout with capacity of 24k tons/year. This division produces
the entire scope of its manufacturing process .In today’s (fresh/frozen chicks, Processed Beef, Processed Chicken
volatile markets, CPC calls on its extensive experience in and seafood products). The end consumers (Retail, non-
managing potential headwinds by developing and retail and exports) It’s inputs is (feed from operation and
executing sound strategies, including cost control within grandparent ODO chicks).
an established range, all while preserving its ability to
react to future improvements in market conditions.
Feed division: CPC grows and produces animal feed for
poultry, cattle and fish across its two production facilities
in Egypt with a cumulative annual production capacity of
0.7mn tons per annum, its end customers (feed traders,
farms and poultry division)

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023
Strategy: The company has invested in the expansion of its production facilities. In one of the latest developments on this
front, in October 2012, CPC approved the creation of a new poultry feed plant in Nubaria (northern Egypt). The investment
of EGP 170mn will reportedly lead to annual production volumes of around 650,000 tons.
Recent Developments:
On July 3, 2022, Cairo Poultry issued an official statement denying that it had received any acquisition offer from
the Saudi-based Almarai Company.
2022) Cairo Poultry Company has removed the import activity related to the company's purposes.
2021) In December, the company announced that its Nobaria plant had been certified with ISO 9001 and ISO 22000, the
certifications for food safety and quality of management system.
2020) In October, CPC launched its new Koki Gold product range, its first new product launch since 2017. The new range
consists of seven products, including chicken and beef, as well as some seafood products for the first time. In April, the
board of directors of CPC approved the final offer submitted by Cairo 3A for International Industries to buy the company’s
stake in Egyptian Starch & Glucose Company. The deal was completed in May 2020.

Feed Division

Poultry Division

Processing Division

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

Iv. Industry Overview The company has a total market cap of EGP 2.4bn as on
SWOT Analysis this report’s date which is together with the current
positive outlook for its industry, are deemed important to
Strengths attract international and regional players to present an
• Cairo Poultry Company (CPC) is the exclusive supplier acquisition offer to the company.
to fast-food restaurants such as KFC, Pizza Hut, Egypt is planning to activate the law regarding banning
McDonald's and Burger King, and to a range of high-end transport of live birds in the way that may boost the
hotels, such as Marriott. company’s financial results.
• It is one of Egypt's leading poultry companies by sales. Egyptian Government is currently adopting a strategic
• There is promising export exposure to the wider Middle plan to cut imports of feed products through increasing the
East region. agriculture of feed crops. Egyptian Government has
already adopted a contracted agriculture for feed crops
• Vertical integration allows for lower operational costs. such as yellow corn, soya bean and sunflower
Weaknesses Cairo Poultry is expected to secure almost its total annual
• Consumer purchasing power remains low. inputs required for the production of feed from the local
farmers. Accordingly, the feed division is forecasted to
• The mass grocery retail network is underdeveloped. lead the growth in the company’s financial results in the
• CPC has had to invest considerably in recent years in a coming period.
new processing plant and in a print and television media Threats
campaign to convince consumers that eating frozen
chicken poses no health risk. • Many consumers remain cautious of processed meats.

Opportunities • Egypt's weak regulatory environment could affect the

pace of expansion.
• The World Organization for Animal Health (OIE) lifted a
14-year-old ban on poultry exports from Egypt in 2020. • Bird flu is an ongoing threat.

• The demand for processed meat is expected to continue

rising steadily on the back of rising incomes and wider
exposure to Western consumption habits.
• Continued growth in Egypt's and the region's food
services industry will increase the demand for CPC's
poultry range.
The company is well positioned to benefit and expand
market share in the local market as almost 40% of small
competitors exit the market due to foreign currency
shortage and high feed costs

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 Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

Recent Industry News

Egypt's Annual Egg Production (in Million unit)
• In the coming period, the Egyptian state 18000 16360

seeks to achieve the largest amount of 16000

13504
15056

14000
production of strategic crops that target the
12000
food security of the Egyptian citizen, such as 10000 9161 9116 9328
10416
9562
10150 10095

wheat, soybeans, and yellow corn. Egypt 8000

7512 7740

annually imports more than 9 million tons of 6000

yellow corn, which is used as inputs and 4000
fodder for livestock and poultry. Egypt 2000

imports more than 90% of its corn needs 0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
from 3 countries: Argentina, Brazil and
Ukraine. It is noteworthy that the area
cultivated with maize last year amounted to
about 2.7 million acres, of which 830
Poultry production in Egypt (in EGP mn)
thousand acres are yellow corn, which aims
at cutting the import of fodder. 80,000
70,000
• The Deputy Minister of Agriculture explained 60,000
that the import bill of this crop is very large, 50,000
40,000
estimated at about USD 2bn every year. Al- 30,000
Sayyad indicated that the cultivated area of 20,000
maize will reach 3mn acres by 2025. 10,000
-
Mahmoud Al-Anani, head of the Poultry 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Producers Union, said that the yellow corn
crop is one of the most important crops that
give high nutritional value to humans,
animals and poultry, noting that a Egypt's Total Animal Production (in EGP Billion)
cooperation protocol was concluded (Cattle, Poultry, Eggs and others)
between the union and the Ministry of 250
Agriculture to supply the yellow corn crop
200
this year
150

100

50

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

Al-Anani added that a guarantee price per ton of Soyabean Production in Egypt
EGP 6,000 was set, provided that the supply 50 40
35
takes place at the international price at the time, 40
30
noting that the Ministry of Agriculture is making 25
30
every effort to provide the necessary quantities of 20
yellow corn to reduce the import bill. He explained 20 15
that the federation is obligated to purchase all the 10
10

contracted quantities from the ministry, which are 5

- -
supplied by farmers at the end of the crop 20072008200920102011201220132014201520162017201820192020
harvest.
crops aera (000 acres) , RHS production (000 Ton) , LHS

• A major Saudi company operating in the food

industry is studying major expansion plans in
Egypt. Egyptian Minister of Trade and Sorghume Production in Egypt
Industry Ahmed Samir pointed out that the 1,000 380

meeting of the company specialized in the 800

370
360
production of food industries reviewed the
600 350
company's expansion plans in the Egyptian 340
market in the field of food industries during 400 330
the next stage The minister pointing to the 320
200
distinct investment opportunities and 310
ingredients available in the Egyptian market - 300
in the food industries sector He added that
the company is present in a large number of
regional and global markets and is one of the crops aera (000 acres) , RHS production (000 Ton) , LHS

largest companies investing in the Egyptian

market in the field of food industries, as it
contributes to providing the needs of the
Maize Production in Egypt
local market and providing thousands of 9,000 2,500
direct and indirect job opportunities, pointing 8,000
2,000
to the company's keenness to strengthen its 7,000
6,000
presence in Egypt through expansion. In new 1,500
5,000
food industries in one of the largest markets 4,000
in which the company spreads outside the 3,000
1,000

Kingdom of Saudi Arabia. 2,000 500

1,000
- -

crops aera (000 acres) , RHS production (000 Ton) , LHS

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

Egypt's Annual Imports of Soyabean | Value (USD

Egypt intends to construct an artificial river with a Million)
2500
length of 114,000 km and at a cost of EGP160bn
(USD5.25bn), to be the longest of its kind in the 2000
world, including the great Nile River.
1500
The volume of water expected to flow from the
station after the project is complete is estimated 1000
at 7.5mn cubic meters per day, so that the final
shape of the river will be 92 km of open path and 500

22 km of underground pipes.
0
35 percent of the piping work and 65 percent of 2017 2018 2019 2020 2021 2022

the open track have been completed.

The project is characterized by its proximity to
airports and ports, and its results also include Egypt Soyabean Domestic Consumption by Year (000
providing more job opportunities, achieving food 17500
MT)
security and import substitution. 17000
16500
The main objective of the giant project is to 16000
increase the area of agricultural lands in Egypt 15500
and to secure food for the Egyptians from basic 15000
commodities, at a time when Egypt is the largest 14500
14000
importer of wheat in the world. 2017 2018 2019 2020 2021 2022

soyabeans's local price (EGP/ton)

30000

25000

20000

15000

10000

5000

0
2017 2018 2019 2020 2021 2022

price (EGP/ton)

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

Egypt's Annual Imports of Corn | Value (USD Million)

3000

2500

2000

1500

1000

500

0
2017 2018 2019 2020 2021 2022

Egypt Corn Domestic Consumption Per Year (000 MT)

17500

17000

16500

16000

15500

15000

14500

14000
2017 2018 2019 2020 2021 2022

Corn local price (EGP/ton)

12000

10000

8000

6000

4000

2000

0
2017 2018 2019 2020 2021 2022

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

v. Financial Analysis
[Link]'s Revenues (Actual and Forecasts) (EGP
Results comment FY2022:
mn)
30,000
Cairo Poultry ([Link]) posted a consolidated net
profit (attributable to shareholders) of EGP 295.89mn for 25,000
24,448

FY2022, marking a 62% Surge, compared to EGP 20,825

182.230mn in FY2021. 20,000 17,671

On a quarterly basis, POUL posted a consolidated net 15,000

profit of EGP 75.13mn for 4Q2022, marking a 22%
Increase compared to EGP 61.60mn in 4Q2021. 10,000 7,728
9,372

6,472
It is worth noting that POUL posted a consolidated net 5,000
4,320 4,575 4,297 4,178
4,996

profit (attributable to shareholders) of EGP 53.3mn,

EGP 185.7mn and EGP 76.401mn in 1Q2022, 2Q2022 -
2017 a 2018 a 2019 a 2020 a 2021a 2022 a 2023 e 2024 e 2025 e 2026 e 2027 e
and 3Q2022, respectively compared to a consolidated
net profit (attributable to shareholders) of EGP 52.7mn,
EGP 27.5mn and EGP 42.5mn in 1Q2021, 2Q2021 and
3Q2021, respectively.
The increase in the company’s net profit in FY2022 was
due to:
Gross profit in EGP mn (Actual and Forecasts)
•30% increase in the gross profit, on the back of 30% 6,000 (2017-2027) 30%

increase in the consolidated operating revenues. The

5,000 25%
company posted a gross profit margin of 20% in
FY2022 thus remained constant compared to 20% in FY 4,000 20%
2021.
3,000 15%
CPC posted 30% increase in operating revenues to
EGP 6.472bn in FY2022, compared to EGP 4.995bn in 2,000 10%
FY2021. POUL posted a gross profit of EGP 1.306bn in
FY2022, versus EGP 1.001bn in FY2021. 1,000 5%

•57% hike in other operating income, which recorded - 0%

2017 2018 2019 2020 2021a 2022 2023 2024 2025 2026 2027
EGP 154.2mn in FY2022, compared to EGP 98.4mn in a a a a a e e e e e
FY2021.
gross profit GPM
•94% Decline in net other expense which recorded EGP
3.54mn in FY2022 versus EGP 58.4mn in FY2021.

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

The increase in the company’s net profit in FY2022 came 50.00% ROA & ROE (2018-2027)
despite:
40.00%
1) Posting foreign currency exchange losses of EGP
30.00%
48.268mn in FY2022 versus foreign currency exchange
gains of EGP 1.366mn in FY2021. 20.00%

10.00%
2)150% hike in total tax expense which recorded EGP
178.8mn in FY2022, versus EGP 71.4mn in FY2021. 0.00%
2018 a2019 a2020 a 2021a 2022 a2023 e2024 e2025 e2026 e2027 e
3)25% increase in G&A expenses which recorded EGP ROAA ROAE
205mn in FY2022 versus EGP 163.6mn in FY 2021.
4)17% increase in interest expense which recorded EGP
42.1mn in FY2022 versus EGP 35.7mn in FY 2021.
Cash flow position (EGP mn)
(Revenues Analysis) 2,500

Net Revenues increased by 29% YoY in FY22 to record 2,000

EGP 6.5bn The increase came on the back of rising local
commodity prices which affected the selling prices across 1,500

all CPC products since the beginning of the year.

1,000
Besides, higher processing volumes contributed to the
increase in revenues. On a quarterly basis, revenues 500
increased by 31% YoY to EGP 1.8 bn. Revenues were
mostly dominated by the Group’s poultry segment -
2018 a 2019 a 2020 a 2021a 2022 a 2023 e 2024 e 2025 e 2026 e 2027 e
contributing the lion’s share of total revenues in FY22 at
NET operating act
38%, surpassing the Processing segment contributing
34% in FY22, while the Feed segment contributed the
remaining 28% during the same period. Cash conversion Cycle (in Days)
70.00
Feed Division-:
60.00
Contributed 28% of CPC’s total revenues in FY2022. 50.00

Revenue 40.00

30.00
34% increase in feed division which recorded EGP
20.00
1.826bn in FY2022 compared to 1.36bn in FY2021. On
quarterly basis: 29% increase in this segment which 10.00

posted revenues of EGP 484mn in 4Q2022 compared to -

2017 a 2018 a 2019 a 2020 a 2021a 2022 a 2023 e 2024 e 2025 e 2026 e 2027 e
EGP 377mn in 4Q2021.
Accounts Receivable (Days) days of payable cash conversion cycle CCC

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
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Volume
other operating income & sales of garnd-
CPC posted 11% decline in feed division which recorded 180
parents and parents (EGP mn)
165,000 tons in FY2022 compared to 184,000 tons in
160
FY2021, on Quarterly basis 37% decline in feed sales volume
which recorded 31,000 tons in 4Q2022 compared to 48,000 140

tons in 4Q2021. 120

100
Average price
80
CPC Posted 50% hike in average price per ton which reached
60
EGP 11,045/ton during FY2022 compared to EGP 7,358/ton
40
during FY2021. But on Quarterly basis CPC Posted an 103%
hike in the average price/ton which recorded EGP 15,777/ton 20

during Q42022 versus EGP 7,788/ton during 4Q2021. 0

2017 2018 2019 2020 2021 2022
Despite the slight drop in volumes YOY by 11%, revenues
other operating income sales of grandparents & parents
from the Feed division increased by 34% YoY to EGP 1.8 bn
in FY22 on the back of a 50% YoY increase in average price
per ton (EGP 11,045/ton during FY 2022 versus EGP
7,358/ton in FY2021) sold during the same period. This was
driven by the foreign currency shortage which directly
affected the prices of raw materials which was partially
passed on to the selling prices.
Poultry Division-:
Contributed 38% of CPC’s total Revenue in FY2022.
Revenue
17% increase in Poultry revenue which recorded EGP 2.44bn
in FY2022 compared to EGP 2.09bn in FY2021, while on
quarterly basis: 13% increase in poultry segment which
posted revenues of EGP 682mn in 4Q2022 compared to EGP
604mn in 4Q2021.
Most of the contribution to the revenues came from the live
bird’s section, and then the broiler section.
Whereas, the Live Birds section posted revenues of EGP
1.9bn in FY2022, compared to EGP 1.58bn in FY2021, thus
contributing 80% of the poultry division`s total revenues in
FY2022.

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

The broiler chicks section contributed 13% of the revenues Processing Division-:
of the poultry section in FY2022. Contributed 34% of CPC’s total revenue in FY2022
Volume Revenue: 43% increase in Processing revenue which
FY22 parent chicks’ volumes witnessed a decline of 18%. recorded EGP 2.16bn in FY2022 compared to EGP 1.51bn
Yet, broiler chicks and live bird volumes shown strong in FY2021, while on quarterly basis: 60% increase in
resilience and stood at almost the same level as FY21. Processing segment which recorded EGP 569mn in
4Q2022 Compared to EGP 356mn in 4Q2021.
Broiler Chicks: CPC Posted 2% increase in broiler chick’s Most of the contribution to the Processing`s revenues
volume which recorded 47mn ODO broiler chicks in came from the value added product section.
FY2022 compared to 46mn ODO broiler chicks in FY2021,
on Quarterly basis 2% decline in in broiler chicks which Revenues from the processing division jumped 43% YoY to
recorded 11mn ODO broiler chicks in FY2022 compared EGP 2.169 bn in spite of the overall year-to-date slowdown
to 12mn ODO broiler chicks in FY2021. in consumption related to the pressured purchasing power.
This came as a result of implementing a focused marketing
Live birds: CPC Posted 4% decline in live bird’s sales plan and the introduction of new products.
volume which recorded 62mn Kg live birds in FY2022
compared to 65mn Kg live birds in FY2021, on Quarterly Volume :Value added product: CPC Posted 16% increase
basis 5% decline in in live birds sales volume which in VA product’s volume which recorded 24.09mn kg in
recorded 17mn Kg live birds in 4Q2022 compared to 18mn FY2022 compared to 20.8 kg in FY2021, on Quarterly
Kg live birds in 4Q2021. basis 22% increase in in VA product’s volume which
recorded 6.08mn kg in 4Q2022 compared to 4.98mn kg in
Average price 4Q2021.
Live birds section Fresh /frozen chicken: CPC Posted 47% increase in Fresh
CPC Posted 33% increase in average price which reached /frozen chicken’s sales volume which recorded 5.8mn Kg in
EGP 32/kg during FY2022 compared to EGP 24/Kg in FY2022 compared to 4mn Kg in FY2021, on Quarterly
FY2021. But on Quarterly basis CPC posted a 40% basis 95% increase in sales volume which recorded 1.3mn
increase in the average which recorded EGP 35/Kg during Kg in 4Q2022 compared to 0.69mn Kg in FY2021.
Q42022 compared to EGP 25/Kg during 4Q2021. Average price : Value added product CPC Posted 20%
Broiler chicks section increase in average price which reached EGP 78/kg during
FY2022 compared to EGP 65/Kg during FY2021. But on
CPC Posted 9% decline in average price which reached Quarterly basis CPC Posted an 26% increase in the
EGP 6.7/ ODO broiler chicks during FY2022 compared to average which recorded EGP 82/Kg during Q42022
EGP 7.4/ ODO broiler chicks during FY2021. But on compared to EGP 65/Kg during 4Q2021.
Quarterly basis CPC Posted a 67% decline in the average
price which recorded EGP 3.1/ ODO broiler chicks during
Q42022 compared to EGP 9.4/ ODO broiler chicks during
4Q2021.

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

Fresh /frozen chicken CPC Posted 25% increase in

average price which reached EGP 50/kg during FY2022 [Link]'s COGS in EGP mn (Actual and
compared to EGP 40/kg during FY2021. But on Quarterly 25,000 Forecasts)
basis CPC Posted a 23% increase in the average which 19,558
20,000
recorded EGP 53/kg during Q42022 compared to EGP 16,244
43/kg during 4Q2021. 15,000 13,430

(Cost analysis: -)
10,000
1-Cost of Sales (COGS) COGS increased by 29% YoY 5,159 5,796
7,029

to EGP 5.2bn in FY22, representing 80% of sales, thus 5,000 3,172 3,454 3,248 3,260
3,987

remained unchanged compared to its percentage of sales

in FY2021. The significant increase in COGS came on -

the back of the soaring prices of global commodities

resulting in increasing the prices of inputs. In 4Q22,
COGS increased by 33% YoY to EGP 1.4bn representing
79% of revenues up from the 78% recorded in 4Q21
2-Selling & Distribution (S&D) Expenses
S&D expenses increased by 13% YoY to record EGP
199mn in FY22 and representing 3.1% of revenues, down
by 0.4 ppts YoY. The increase in S&D expenses came on
the back of increased marketing expenses during the
period in addition to the change in product mix in Koki
which entails higher distribution and transportation costs.
3-General & Admin. (G&A) Expenses
G&A expenses came in at EGP 205 million in FY22,
higher 26% YoY and representing 3.2% of revenues,
down 0.1 percentage points YoY. Between 4Q21 and
4Q22, G&A expenses increased to EGP 74 million, to
stand at 4.2% of total revenue, up from 3.2% recorded in
4Q21.

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Cairo Poultry Company (CPC) [Link]
Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

vi. Valuation:

Sales Volumes 2016 2017 2018 FY19 FY20 FY21 FY22 F23 F24 F25 F26 F27
Feed (000 Tons) 208 282 281 213 211 186 165 180 220 500 550 600
GPs (000 Chicks) 2,372 2,507 2,236 2,212 2,585 2,294 1,878 1,900 2,000 2,200 2,300 2,500
Parents (mn ODO) 33 35 31 38 33 46 47 50 50 50 50 50
Broilers (000 Tons) 16 42 45 49 47 65 62 65 70 75 80 85
Processed (Tons) 16 10 8 11 10 4 6 7 8 9 10 11
Value Added (Tons) 22 17 17 18 19 21 24 24 24 24 24 24
Total Processing 37 27 25 29 29 25 30 31 32 33 34 35

Prices 2016 2017 2018 FY19 FY20 FY21 FY22 F23 F24 F25 F26 F27
Feed (EGP/Ton) 4,341 6,155 6,601 6,570 5,655 7,358 11,045 13,254 14,579 16,037 17,640 19,405
GPs (EGP/Chick) 42 60 73 58 64 77 82 98 108 118 130 143
Parents (EGP/ODO) 5 7 7 5 8 7 7 7 8 9 10 11
Broilers (EGP/KG) 16 22 23 23 22 24 32 35 39 66 73 80
Processing (EGP/KG) 32 47 51 53 51 61 72 80 88 120 132 145

Revenues (EGP mn) 2,016 2,017 2,018 FY19 FY20 FY21 FY22 F23 F24 F25 F26 F27
Feed 903 1,738 1,853 1,402 1,193 1,366 1,826 2,386 3,207 8,018 9,702 11,643
Grand Parents 99 151 164 129 166 177 153 186 215 261 300 358
Parents 167 247 227 202 252 340 316 370 407 448 493 542
Broilers 262 918 1,024 1,122 1,003 1,580 1,974 2,282 2,703 4,950 5,808 6,788
Processing 1,200 1,239 1,287 1,529 1,494 1,514 2,169 2,470 2,804 3,960 4,488 5,082
Others 22 25 20 31 70 20 35 35 35 35 35 35
Total 2,653 4,320 4,575 4,415 4,178 4,996 6,472 7,728 9,372 17,671 20,825 24,448

% of Revenues 2016 2017 2018 FY19 FY20 FY21 FY22 F23 F24 F25 F26 F27
Feed 34.0% 40.2% 40.5% 31.8% 28.6% 27.3% 28.2% 30.9% 34.2% 45.4% 46.6% 47.6%
Grand Parents 3.7% 3.5% 3.6% 2.9% 4.0% 3.5% 2.4% 2.4% 2.3% 1.5% 1.4% 1.5%
Parents 6.3% 5.7% 5.0% 4.6% 6.0% 6.8% 4.9% 4.8% 4.3% 2.5% 2.4% 2.2%
Broilers 9.9% 21.3% 22.4% 25.4% 24.0% 31.6% 30.5% 29.5% 28.8% 28.0% 27.9% 27.8%
Processing 45.2% 28.7% 28.1% 34.6% 35.8% 30.3% 33.5% 32.0% 29.9% 22.4% 21.6% 20.8%
Others 0.8% 0.6% 0.4% 0.7% 1.7% 0.4% 0.5% 0.4% 0.4% 0.2% 0.2% 0.1%

Source: Company Disclosure. But assumed production of feed for the period from 2024 (in 000 tons) as well the assumed prices for broilers
and processing in EGP/KG starting 2024 (and thereafter) are assumptions made by Faisal Islamic Brokerage Research.

Feed Section Designed Capacity in 000 tons 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0
Utilization Rate 32.8% 32.5% 28.6% 25.4% 27.7% 33.8% 76.9% 84.6% 92.3%

Revenues (EGP mn) 2022 Contribution

Revenues (EGP mn) Contribution
Feed 1,825,521 28%
Feed 11,642,711 48%
Grand Parents 153,169 2%
Grand Parents 358,220 1%
Parents 316,273 5%
Parents 541,930 2%
Broilers 1,974,179 31%
Broilers 6,788,100 28%
Processing 2,168,679 34%
Processing 5,082,000 21%
Others 34,607 1%
Others 34,607 0%
6,472,429
24,447,569

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Egypt | Food and Beverage Sector | Initiation of Coverage
Tuesday, July 18, 2023

2022 2023 2024 2025 2026 2027

WAAC 25.9% 26.4% 25.6% 26.2% 26.4%
Cost of Debt (after tax) 10.0%
Cost of Equity 31.7%
Debt (EGP mn) 695
Equity (EGP mn) 1,364
TotaL Capital (EGP mn) 2,059
Debt/Total Capital 33.8%
Equity/Total capital 66.2%
Cash (EGP mn) 98

Discounted Cash Flow (EGP mn) 2023 2024 2025 2026 2027
EBIT
1,000 1,278 2,672 2,751 2,797
Cash Taxes
225 288 601 619 629
D&A
469 503 509 581 626
Capex
541 515 663 677 672
Changes in NWC
150 264 1,585 585 679
FCFF
552 714 332 1,451 1,442 6,337
PV of FCFF
492 502 188 643 502 2,206
Terminal Value
6,337
PV of Terminal Value
2,206

Fair Value
Enterprise Value (EGP mn) 4,532
Cash (EGP mn) 98
Debt (EGP mn) 695
Equity Value (EGP mn) 3,935
Outstanding No of Shares (mn) 479
Fair Value (EGP/share) 8.22
Current Market Price (EGP/share) 5.03
Potential Capital Gains 63%

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vii. Key financials

Income Statement in EGP
2017 a 2018 a 2019 a 2020 a 2021a 2022 a 2023 e 2024 e 2025 e 2026 e 2027 e
mn
Revenue 4,320 4,575 4,297 4,178 4,996 6,472 7,728 9,372 17,671 20,825 24,448
COGS (3,172) (3,454) (3,248) (3,260) (3,987) (5,159) (5,796) (7,029) (13,430) (16,244) (19,558)
Gross Profit 1,147 1,121 1,049 918 1,009 1,314 1,932 2,343 4,241 4,582 4,890
Net Operating (Exp) inc (243) (279) (218) (301) (299) (253) (464) (562) (1,060) (1,250) (1,467)
EBITDA 904 842 831 618 710 1,061 1,468 1,781 3,181 3,332 3,423
Depreciation (305) (498) (575) (414) (422) (487) (469) (503) (509) (581) (626)
EBIT 599 344 256 204 288 573 1,000 1,278 2,672 2,751 2,797
Net Interest Exp (119) (138) (81) (49) (34) (90) (68) (83) (158) (191) (230)
EBT 481 206 175 155 253 483 931 1,195 2,514 2,560 2,567
Tax income (115) 146 (58) (51) (69) (187) (210) (269) (566) (576) (578)
Net Income 366 352 117 104 184 296 722 926 1,949 1,984 1,989
Minority Interest in Earnings 5.8 1.9 0.1 0.6 2.0 0.2 - - - - -
Net Income to Stockholders 360 350 117 103 182 295 722 926 1,949 1,984 1,989
EPS (EGP/Share) 0.8 0.7 0.2 0.2 0.4 0.6 1.5 1.9 4.1 4.1 4.2

Balance Sheet in EGP mn 2017 a 2018 a 2019 a 2020 a 2021a 2022 a 2023 e 2024 e 2025 e 2026 e 2027 e
Current assets
Cash 77 45 39 107 98 241 761 1,529 2,615 4,259 5,937
Inventory 512 583 553 570 470 1,326 1,270 1,541 2,944 3,560 4,287
A/R 366 455 469 472 530 735 792 960 1,811 2,134 2,505
Prepaid exp & other debit balance 37 59 50 45 27 52 76 92 174 205 241
T. bills 2 2 2 125 152 - 57 57 57 57 57
assets held for sale 103 120 116 102 107 188 123 123 123 123 123
Total Current Assets 1,096 1,264 1,229 1,421 1,385 2,543 3,079 4,302 7,723 10,338 13,149
Non Current Assets
Fixed Assets 975 1,020 1,040 1,050 1,029 1,016 1,072 1,085 1,239 1,335 1,382
Fixed Assets underconstruction 44 27 35 45 36 61 35 37 38 43 46
Poultry Assets 155 197 181 186 188 109 170 170 170 170 170
Plant Asset 2 2 2 3 8 8 8 8 8 8 8
Profit Share from Investments in associates 137 115 109 - - - - - - - -
Other Assets 0 1 0 15 19 20 20 20 20 20 20
Total Non-Current Assets 1,314 1,363 1,368 1,299 1,280 1,213 1,305 1,320 1,475 1,576 1,626
Total Assets 2,410 2,627 2,596 2,720 2,665 3,756 4,384 5,622 9,198 11,915 14,775
EQUITY
Paid up Capital 479 479 479 479 479 479 479 479 479 479 479
Legal Reserve 281 298 360 322 325 330 366 413 510 609 709
Rtained Earnings 470 426 339 460 545 813 1,441 2,261 4,049 5,867 7,687
Common Equity 1,231 1,203 1,178 1,261 1,349 1,622 2,286 3,153 5,038 6,955 8,875
Non-Controling Interests 13 14 13 13 15 14 14 14 14 14 14
Total Equity 1,244 1,217 1,191 1,274 1,364 1,636 2,300 3,167 5,052 6,969 8,889
Current Liabilities
Provisions for Expected Claim 159 134 132 137 142 147 147 147 147 147 147
Credit Facilities 325 577 602 547 448 688 852 1,033 1,974 2,387 2,874
Account and Notes Payable 443 524 518 613 541 1,024 898 1,090 1,840 2,225 2,679
Due to Related Partes 10 5 2 5 0 - - - - - -
Long Term Loan-Current 28 17 17 - - - - - - - -
Income Tax Payable 93 59 57 47 70 153 77 77 77 77 77
Financial Lease Liabilities - - - 7 7 7 7 7 7 7 7
Total Current Liabilities 1,057 1,316 1,328 1,357 1,209 2,019 1,982 2,354 4,045 4,844 5,785
Non-Current Lianbilities
Finance Lease - - - 9 13 15 15 15 15 15 15
Long Term Loan 33 17 - - - - - - - - -
Deferred Tax Liab 76 77 77 81 78 87 87 87 87 87 87
Total Non-Current Liabilities 109 93 77 90 92 101 101 101 101 101 101
Total Liabilities 1,166 1,409 1,405 1,446 1,301 2,120 2,083 2,455 4,146 4,945 5,886
Total L&E 2,410 2,627 2,596 2,720 2,665 3,756 4,383 5,622 9,198 11,914 14,775

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Cash flow statement (in EGP mn) 2018 a 2019 a 2020 a 2021a 2022 e 2023 e 2024 e 2025 e 2026 e 2027 e
Net Cash from Operating 574 710 614 607 193 1,035 1,170 877 1,984 1,941
Net Cash from Investing (569) (586) (563) (427) (267) (411) (523) (668) (687) (681)
Net Cash from Financing (152) (136) (76) (187) 218 106 121 877 347 417
Net Cash (147) (11) (26) (6) 144 730 768 1,086 1,644 1,677

Financial Ratios 2018 a 2019 a 2020 a 2021a 2022 a 2023 e 2024 e 2025 e 2026 e 2027 e
current ratio 1.0 0.9 1.0 1.1 1.3 1.6 1.8 1.9 2.1 2.3
quick ratio 0.5 0.5 0.6 0.8 0.6 0.9 1.2 1.2 1.4 1.5
cash ratio 0.2 0.2 0.3 0.3 0.2 0.5 0.8 0.7 1.0 1.1
A/R turnover ratio 11.1 9.3 8.9 10.0 10.2 10.1 10.7 12.8 10.6 10.5
Days of sales outstanding 32.8 39.2 41.1 36.6 35.7 36.1 34.1 28.6 34.6 34.6
inventory turnover ratio 6.3 5.7 5.8 7.7 5.7 4.5 5.0 6.0 5.0 5.0
Days of inventory on hand (DOH) 57.9 63.8 62.9 47.6 63.5 81.7 73.0 60.9 73.1 73.2
A/P turnover ratio 7.1 6.2 5.8 6.9 6.6 6.0 7.1 9.2 8.0 8.0
days of payable 51.1 58.6 63.4 52.8 55.4 60.5 51.6 39.8 45.7 45.8
cash conversion cycle CCC 39.49 44.50 40.60 31.35 43.83 57.28 55.49 49.75 61.97 62.09
W.C Turnover ratio 8.8 7.6 8.1 10.4 8.2 6.6 6.8 7.7 6.2 6.1
fixed asset turnover ratio 4.6 4.2 4.0 4.8 6.3 7.4 8.7 15.2 16.2 18.0
total assets turnover ratio 1.8 1.6 1.6 1.9 2.0 1.9 1.9 2.4 2.0 1.8
GPM 25% 24% 22% 20% 20% 25% 25% 24% 22% 20%
Pre tax margin 5% 4% 4% 5% 7% 12% 13% 14% 12% 10%
NPM 8% 3% 2% 4% 5% 9% 10% 11% 10% 8%
ROAA 14% 4% 4% 7% 9% 18% 19% 26% 19% 15%
ROAE 29% 10% 8% 14% 20% 37% 34% 48% 33% 25%
Return on total capital 19% 14% 11% 16% 25% 32% 31% 38% 29% 24%
tax burden 170% 67% 67% 72% 61% 78% 78% 78% 78% 78%
interest burden 60% 68% 76% 88% 84% 93% 94% 94% 93% 92%
EBIT margin 8% 6% 5% 6% 9% 13% 14% 15% 13% 11%
financial leverage ratio (equity multplier) 207% 219% 218% 206% 216% 208% 184% 181% 176% 169%
total debt (EGP mn) (credit facilities) 610.4 618.2 547.0 447.8 688.2 851.8 1,033.0 1,973.7 2,387.1 2,874.2
debt to asset ratio 23% 24% 20% 17% 18% 19% 18% 21% 20% 19%
debt to equity ratio 50% 52% 43% 33% 42% 37% 33% 39% 34% 32%
debt to capital ratio 33% 34% 30% 25% 30% 27% 25% 28% 26% 24%
EPS (EGP) 0.7 0.2 0.2 0.4 0.6 1.5 1.9 4.1 4.1 4.2
BVPS (EGP) 2.5 2.5 2.6 2.8 3.4 4.8 6.6 10.5 14.5 18.5

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Disclosures and disclaimers

This report has been prepared in accordance with financial evaluation standards, technical and professional standards, and
based on information and data obtained from sources we believe to be correct and reliable. Recommendations and judgmental
results bear right and wrong, and the company reserves all its moral and moral rights over the data and analysis. This report
may be viewed and may not be copied, distributed, broadcasted, rephrased, derived from it, or any action taken without
referring to the company and obtaining the written consent of the company. The company also reserves the right to amend any
of the contents of this report without announcing it. Knowing that the validity period of the report is (3) months.

Research Team

Hesham ElShebeini Ibrahim Adel Ahmed Abdelrahman

Head of Research Equity Analyst Equity Analyst
E-mail: E-mail: E-mail:
[Link]@[Link] [Link]@[Link] [Link]@[Link]

Marketing and trading department

Amr saber
[Link]@[Link]

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