Pilgrim's Pride Corp "Waiting for the wind - Initiate PPC at Neutral" (Neutral)

Research evidence excerpt

Pilgrim's Pride Corp "Waiting for the wind - Initiate PPC at Neutral" (Neutral)

12/26E

+4.8% YoY growth. PPC has ~60% of its EBITDA coming from the US, where it holds a From To % ch Cons.

significant market share with ~1 in 6 lbs of poultry sold in the country. Q1E - 0.43 - 0.51

Q2E - 0.85 - 0.94

Corn prices add risk to feed costs Q3E - 1.00 - 1.11

We expect corn prices (~half of feed costs) to climb to >US$5/bu which adds cost Q4E - 0.67 - 0.67

pressure to poultry producers - we calculate that every 10% corn price increase 12/26E - 2.94 - 3.33

translates into a ~1pp downside to PPC EBITDA margin, all things equal. After a 12/27E - 3.29 - 3.60

12/28E - 3.50 - 3.57

modest surplus in 2025/26, we expect the market to tip into a deficit as lower

acreage and normalized yields in the US, a reversion from record crop in Argentina, Matheus Enfeldt

and reduced area in India pull global STU to ~20% vs an average of 22%. We see corn Analyst

prices rising to US$5.1/bu in 2026/27 and US$5.3/bu in 2027/28 (from US$4.4/bu matheus.enfeldt@ubs.com

both in 2024/25 and 2025/26TD), with risks skewed to the upside should fertilizer +55-11-2767 6975

costs remain elevated and constrain acreage expansion or input application. Victor Modanese

Associate Analyst

Valuation: Initiate with a Neutral rating and US$30/sh price target victor.modanese@ubs.com

+55-11-2767 6008We initiate with a Neutral rating. Our US$30/sh price target is based on a 5.5x 2027E

EV/EBITDA, which is consistent with the low of the trading range of 5.5-7.5x, given

our expectations for weak near-term earnings momentum. Risk to our thesis both

ways is the behaviour of US demand for poultry and price transference from beef.

Additionally, feed prices should remain a volatile variable through the near term.