Cal-Maine Foods, Inc. Analysts: Yujiang (Walter) Chen Amey P Dargude (NASDAQ:CALM) Analysts: Yujiang (Walter) Chen Amey P Dargude Rahul Gohil Yue (Benjamin) Xu Yuqing Zhang Presented on 14 Dec, 2015

Agenda Screen Criteria Company Overview Industry and Macroeconomics Overview Technical Analysis Stock Market Prospects Comparable Analysis Financial Analysis Financial Projection Valuation Recommendation

Screening Criteria Cal-Maine Foods Piotroski Score Diversification = 7 Altman Z = 8.11 Current ratio > 2 Market Cap < 3 Bn Diversification

CM Business Overview Founded in 1957 in Mississippi Largest producer and marketer of shell eggs in the United States Since 1989, completed 18 acquisitions Sell most of the eggs in southwesten, mid-westen and mid-Atlantic regions. Production, grading, packaging, marketing and distribution of shell eggs CM Feed mills Hatch Breeder Pullet growing Egg production Processing and packing Sales and distribution Grocery store, club stores, foodservice distributors, egg product customers Own state-of-the-art breeder , hatchery and laying facilities Modern “in-line” facilities to gather, grade and package eggs Produce 75% of shell eggs sold and purchase 25% from outside producers CALM 2015 10K pg. 3-6, , CALM Investor Presentation Nov 2015, pg.8

Non-specialty shell eggs Product Major Products Inelasticity of demand, small increases in production or decreases in demand can have a large adverse effect on prices Cyclical Non-specialty shell eggs One of the largest producers and marketers of value-added specialty shell eggs Include nutritionally enhanced, cage free, organic and brown eggs Higher price, less cyclical Sell Specialty shell eggs under four brand: Egg-Land’s Best®, Land O’ Lake s®, Farmhouse®, and 4-Grain® Specialty shell eggs Broken shell eggs and sold in liquid, frozen, or dried form Egg products CALM 2015 10K pg. 6-7

Revenue Breakdown Net sales ($ in millions) & Total shell eggs sold (in millions of dozens) Urner-Barry Egg Market Price (per dozen eggs) 2015 Product Sales Breakdown FY 2015 sold 1063.1 million dozen eggs, represent 23% of domestic shell egg consumptions Sell the majority of non-specialty shell eggs at prices related to Urner Barry Market Quotations or formulas related to costs of production which include the cost of corn and soybean meal Feed is a primary cost component, ranging from 62% to 69% of total production cost CALM 2015 10K pg. 3-6, 22

Growth Strategy Enhance production capacity and efficiency Pursue acquisitions of existing shell egg production and processing facilities Enhance production capacity and efficiency Increase value-added specialty egg business Fiscal year Company Acquisition payments ($ in thousands) Benefits 2014 Delta Egg Farm, LLC $1,700 1.2 million hen production capacity and feed Mill, 0.4 million organic egg production capacity 2012 Maxim Productions Co. Inc. $6,490 Feed mill, 3.5 million hens production and pullet grow out capacity Pilgrim" Pride Corporation $1,630 1.4 million hen production capacity CALM 2015 10K pg. 46, CALM Investor Presentation Nov 2015, pg.18

S W O T SWOT Analysis Positive Negative Strengths Weaknesses 1) Economics of scale 2) Highest gross margin, profit margin, highest liquidity and lowest debt ratio. 1) Acquisition strategy is unsustainable; 2)Legal problems. S W Strengths Weaknesses 1) Growing demand on specialty shell eggs. 2) Technology innovation 1)Stronger regulations. 2) Customers’ preference may change. O T Opportunities Threats Yahoo Finance, IBIS World

Industry Analysis Porter’s Five Forces Rivalry among Existing Competitors (High) A medium level of concentration Eggs are largely homogenous Competition by low prices Mature industry, experiencing consolidation Threat of new Entrants (Moderate) The level of capital intensity is high Egg production regulation is strong Five Force Supplier Bargaining Power (Moderate) The Corn, Wheat and Soybean Wholesaling industry Moderate industry concentration; Differentiation is low and competition is high Threat from substitutes (Moderate) A world leader in egg-production technology and processes The price of meats is expected to grow faster than the price of eggs in 2016 Buyer’s Bargaining Power (Moderate) The retail sector accounts for 45.0% of revenue in 2014. Highly competitive IBISWorld, Egg Demand Dashboard (American Egg Board)

Macro Economics Analysis US Household spends 6.5% of “Meat & Eggs Spending” on Eggs Up 54% since 2003 Shifting from beef High relative cost per pound Rising demand for low calorie foods US natural and organic F&B sales to rise Account for about 9% of total US F&B sales, up from 4% in 2005 Increasing consumer preferences for healthy foods & ingredient transparency Egg Demand Dashboard (American Egg Board), Bloomberg

Macro Economics Analysis (cont’d) Egg prices have increased historically, but remain volatile. Feed prices are volatile but are expected to be close to this level till 2020.   CALM Investor Presentation Nov 2015

Technical Analysis Yahoo Finance

Stock Market Prospects Yahoo Finance

Financial Analysis Liquidity Ratio Profitability Ratio Analysis Leverage Ratio Analysis Favorable liquidity Decreasing leverage Steadily increasing operating margin CALM 10K (2011 – 2015)

Financial Analysis （cont’d) Activity Ratio Greenblatt Analysis Du Pond Analysis Steady activity ratios Changes in interest burden, becoming steady on 2012 onwards Increasing ROIC Earning yield from Greenblatt analysis seems to recover and grow CALM 10K (2011 – 2015)

Market Comparable Tyson Foods (TSN) Founded in 1935 and Headquartered in Springdale, Arkansas, it operates through four segments: Chicken, Beef, Pork, and Prepared Foods and fabricates them into value-added products. Marketing channel through its sales staff to grocery retailers, grocery wholesalers, meat distributors, industrial food processing companies, chain restaurants or their distributors, and domestic distributors, as well as through independent brokers and trading companies. Sanderson Farms (SAFM) Founded in 1947 and headquartered in Laurel, Mississippi, it produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States Using the brand name to sell the products to retailers, distributors, and casual dining operators in the southeastern, southwestern, northeastern, and western United States, as well as to customers who resell frozen chicken in the export markets. Pilgrim’s Pride Corporation (PPC) Founded in 1946 and is headquartered in Greeley, Colorado, it engages in the production, processing, marketing, and distribution of fresh, frozen, and value-added chicken products. Sells its products to food service market, including chain restaurants, food processors, broad-line distributors, and other institutions; and retail market customers that primarily include grocery store chains, wholesale clubs, and other retail distributors. Yahoo Finance, Capital IQ

Financial Analysis for Market Comparable Current Ratio Operating Margin Debt-to-Equity Ratio Ratio CALM has the best liquidity, and higher operating margin Low debt leverage, meaning there is sufficient internal cash flow to support the future development

Target Price (Forward P/E) Target Price (Trailing P/E) Comparable Valuation Ticker Forward P/E P/BV P/CF Trailing P/E Weight TSN 17.82x 1.62x 6.10x 17.43x 25% SAFM 12.32x 1.86x 5.44x 6.06x 50% PPC 10.69x 2.54x 5.23x 7.43x CALM 13.29x 1.97x 5.55x 9.25x Items Price Multiples Weight EPS (estimated in 2016) Target Price (Forward P/E) $4.44 $65.02 61% EPS (2015) Target Price (Trailing P/E) $3.35 $30.98 13% OCF per share (2015) Target Price (P/CF) $4.04 $24.70 Book Value per share (2015) Target Price (P/BV) $14.61 $31.70 Final Target Price $51.02 Upside Potential 9.66% Note: all the stock prices are day closed on Dec. 11, 2015 Yahoo Finance, Capital IQ

Financial Projection ASSUMPTION 2014A 2015A 2016F 2017F 2018F 2019F Plan to increase the sales of specialty eggs, facing more demand from market. Also, specialty eggs have higher prices and less fluctuation ASSUMPTION 2014A 2015A 2016F 2017F 2018F 2019F 2020F Income Statement Non-specialty shell egg sales 990,073.00 1,059,070.00 1,116,989.27 1,166,906.18 1,207,384.75 1,237,193.64 1,255,366.53 YoY % Growth 9.98% 6.97% 5.47% 4.47% 3.47% 2.47% 1.47% Specialty shell egg sales 337,243.00 416,127.00 513,462.64 625,863.97 753,482.94 895,822.26 1,051,613.36 15.02% 23.39% 21.89% 20.39% 18.89% 17.39% Co-pack specialty shell egg sales 52,786.00 43,282.00 47,783.83 52,037.14 55,888.48 59,186.55 61,791.44 15.65% 10.40% 8.90% 7.40% 5.90% 4.40% Other 7,590.00 11,769.00 16,786.38 23,607.06 32,726.98 44,715.59 60,201.58 32.39% 55.06% 42.63% 40.63% 38.63% 36.63% 34.63% Net shell egg sales 1,387,692.00 1,530,248.00 1,695,022.11 1,868,414.34 2,049,483.16 2,236,918.04 2,428,972.90 11.97% 10.27% 10.77% 10.23% 9.69% 9.15% 8.59% Egg Products 53,215.00 45,880.00 55,849.46 58,345.31 60,369.24 61,859.68 62,768.33 % of non-specaility shell eggs 5.37% 4.33% 5.00% Total Net Sales 1,440,907.00 1,576,128.00 1,750,871.58 1,926,759.65 2,109,852.40 2,298,777.72 2,491,741.23 11.86% 9.38% 11.09% 10.05% 9.50% 8.95% 8.39% CAGR

Financial Projection (cont’d) Based on Soy and Corn prices Cost of sales: 2014A 2015A 2016F 2017F 2018F 2019F 2020F Farm production 575,392.00 558,580.00 565,171.24 584,274.03 616,876.52 664,869.52 YoY % Growth 5.53% -2.92% 0.00% 1.18% 3.38% 5.58% 7.78% Processing and packaging 156,088.00 173,181.00 188,682.21 205,099 222,431.89 240,673.25 259,808.88 13.52% 10.95% 8.95% 8.70% 8.45% 8.20% 7.95% Outside egg purchases and other 371,885.00 413,863.00 459,386.86 506,379.82 555,453.30 606,252.12 658,303.05 % of Net shell eggs 26.80% 27.05% 27.10% Total Shell eggs 1,103,365.00 1,145,624.00 1,206,649.07 1,277,121.98 1,363,698.64 1,467,147.34 1,589,033.07 Egg products 33,509.00 33,886.00 36,250.12 38,367.27 40,968.20 44,076.00 47,737.69 % of Total shell eggs 3.04% 2.96% 3.00% Other 1,269.00 897.00 1,174.16 1,242.73 1,326.98 1,427.64 1,546.24 0.12% 0.08% 0.10% Total Costs of Sales 1,138,143.00 1,180,407.00 1,244,073.35 1,316,731.98 1,405,993.82 1,512,650.99 1,638,317.01 Based on the fact that more automated process Fixed % of total shell eggs are bought from outside and remain constant year on year

Cost of Equity & WACC

Discounted Cash Flow Valuation Cal-Maine Foods, Inc. Discounted Cash Flow Analysis ($ thousands)   1 2 3 4 5 2016E 2017E 2018E 2019E 2020E Terminal Value Net Income 220,482.74 277,623.36 328,247.27 371,446.57 405,246.49 Depreciation 45,221.25 49,764.06 54,492.95 59,372.49 64,356.32 Capital Expenditures (98,386.89) (115,977.63) (135,437.96) (156,760.77) (179,886.51) Changes in Net Working Capital (33,558.81) (9,899.20) (19,153.46) (20,181.66) (20,318.34) Less Increases in A/R 9,309.74 11,062.82 11,251.79 12,028.28 11,990.69 Less Increases in Inventories 33,724.40 8,446.97 17,905.93 18,476.34 18,871.26 Plus Increases in A/P 9,475.33 9,610.59 10,004.26 10,322.96 10,543.60 Free Cash Flow 133,758 201,511 228,149 253,877 269,398 3,003,661 Present Value 119,755 161,527 163,734 163,123 154,975 1,727,894 Discount Rate 11.69% Terminal Growth Rate 2.50% Calculation of Implied Share Price   Implied Enterprise value 2,491,007 Less Debt 40,795 Implied Market Value 2,450,212 Number of shares outstanding 43,698 Price $56.07 Sensitivity table $56.07 2.00% 2.25% 2.50% 2.75% 3.00% 3.25% 11.19% $ 57.02 $ 58.24 $ 59.54 $ 60.91 $ 62.37 $ 63.92 11.44% $ 55.39 $ 56.54 $ 57.76 $ 59.04 $ 60.40 $ 61.85 11.69% $ 53.85 $ 54.93 $ 56.07 $ 57.28 $ 58.55 $ 59.90 11.94% $ 52.39 $ 53.40 $ 54.48 $ 55.61 $ 56.80 $ 58.06 12.19% $ 51.00 $ 51.96 $ 52.96 $ 54.03 $ 55.15 $ 56.33 Current Price $ 46.53 Upside Potential 20.51%

Recommendation: buy 100 shares at market price Dividend yield: Current Yield 8.15% ($ 3.93), last year dividend yield 2% (1.11), 1/3rd net income distributed as dividend Expansion in Specialty eggs market (higher priced and less volatile In prices) Expansion opportunity throughout U.S. Current stock price: $46.53 DCF valuation: $56.07 Changing Consumer Preference Flock diseases Regulations Recommendation: buy 100 shares at market price