CIMB Research lowered its target price for cocoa company Petra Foods to $2.04 from $2.34 and kept its ’underperform’ rating on the stock, citing potentially lower processing margins.
Shares of Petra Foods were flat at $2.46 by 9:30 a.m.. They have surged 33% since the start of the year, compared with the Thomson Reuters Asia Pacific ex Japan Food Processing Index’s 2.3% rise.
“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,” said CIMB in a report.
Indonesia’s grinding capacity is expected to jump 43% in 2012 on new installations, according to the Indonesian Cocoa Industry Association, and CIMB expects capacity to grow another 28% to 500,000 metric tonnes by 2013, tipping the industry into oversupply.
The new capacity will stiffen competition and erode the margins of processors such as Petra Foods, CIMB said.
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