Gudang Garam(GGRM IJ)

Transcription

1 Equity Research 1Q17 Result Note Monday,30 April 2018 HOLD Maintain Last price (IDR) 67,800 Target Price (IDR) 83,800 Upside/Downside +23.6% Previous Target Price (IDR) 83,800 Stock Statistics Sector Bloomberg Ticker CIGARETTE GGRM IJ No of Shrs (mn) 1,924 Mkt. Cap (IDRbn/USDmn) 130,453/9,390 Avg. daily T/O (IDRbn/USDmn) 69.8/5.0 Major shareholders (%) SURYADUTA INVESTAMA 69.3 SURYAMITRA KUSUMA 6.3 Estimated free float 23.8 EPS Consensus (IDR) 2019F 2020F 2021F Danareksa 4, , ,250.9 Consensus 4, ,592.3 n/a Danareksa/Cons 0.8 (0.7) (0.7) GGRM relative to JCI Index Gudang Garam(GGRM IJ) Solid revenues but margins squeezed GGRM reported 1Q18 net profits of around IDR1.9tn, down 19% qoq and flat yoy, following lower margins across the board. At the top line, GGRM reported 10% yoy revenues growth, driven by SKM (+13.5% yoy) while SKT booked 6.8% growth yoy. The 1Q18 earnings are 22% of our full year forecast and consensus estimates, i.e. slightly below (1Q16-17: 24-25% of FY). Solid 1Q18 top line growth supported by higher ASP. GGRM reported solid 1Q18 revenues of around IDR22tn, +10.1% yoy, supported by higher ASP, we believe. Based on our survey, GGRM increased its average retail selling prices by 9.1% and 10.2% by the end of February and April 2018, respectively. The 1Q18 revenues are 23.7% of our full year forecast and 23.8% of consensus estimates, i.e. inline. Lower margins across the board. In 1Q18, the gross margin declined to 20.1% from 23.4% in the previous quarter. We believe that soft demand with higher excise prevented the company from raising selling prices further, resulting in lower gross margins. This filtered down to lower operating margins on the back of maintained opex spending. Below the operating line, GGRM reported lower interest expenses. Hence, at the bottom line, the 1Q18 net profits were flattish yoy at IDR1.9tn (down 19% qoq) with a lower net margin of 8.6% (FY17: 9.3%). The 1Q18 earnings are 22% of our full year forecast and consensus estimates, i.e. slightly below (1Q16-17: 24-25% of the FY number). Better inventory days. By the end of March 2018, inventory days improved to 178 days, while receivables and payable days were maintained at 10 and 6 days, respectively. This allowed the cash conversion cycle to improve to 182 days from 207 days in 4Q17. It is also worth noting that GGRM reported lower 1Q18 gearing of 13.8% (FY17: 48.8%). Maintain HOLD. GGRM s share price has tanked 19% ytd. Therefore, the recent weakness should provide the opportunity to accumulate the shares given the expectation of better purchasing power in the coming quarters given the 2019 regional elections. Nonetheless, the company s plan to develop a new airport in Kediri, East Java, with an estimated investment cost of IDR5tn may negatively impact the company s cash flow and thus lead to lower dividend payments going forward. We will revisit our forecast following the release of the 1Q18 result. Source : Bloomberg x Natalia Sutanto (62-21) ext.3508 natalia.sutanto@danareksa.com Key Financials Year to 31 Dec 2017A 2018A 2019F 2020F 2021F Revenue (IDRbn) 83,306 92, , , ,434 EBITDA (IDRbn) 13,363 14,080 15,135 16,434 17,986 EBITDA Growth (%) Net profit (IDRbn) 7,754 8,475 9,560 10,688 12,027 EPS (IDR) 4, , , , ,250.9 EPS growth (%) BVPS (IDR) 21, , , , ,709.7 DPS (IDR) 2, , , , ,583.1 PER (x) PBV (x) Dividend yield (%) EV/EBITDA (x) Source : GGRM, Danareksa Estimates See important disclosure at the back of this report 1

2 Exhibit 1. Revenues and Growth Exhibit 2. Net Profits and Growth Exhibit 3. Margins Exhibit 4. Gearing Level Exhibit 5. 1Q18 result 1Q17 4Q17 1Q18 qoq yoy 2018F A/F A/Cons Revenue, IDRbn 19,970 21,783 21, % 10.1% 92, % 23.8% COGS (15,573) (16,680) (17,568) 5.3% 12.8% (72,908) Gross Profit 4,396 5,103 4, % 0.4% 19, % 21.7% Opex (1,644) (1,707) (1,730) 1.3% 5.2% (7,940) Operating Profit 2,752 3,396 2, % -2.5% 11, % 21.6% Profit Before Tax 2,533 3,162 2, % -0.1% 11,336 Net Income 1,889 2,336 1, % 0.2% 8, % 22.3% Gross margin, % 22.0% 23.4% 20.1% 21.4% Opex to revenue, % 8.2% 7.8% 7.9% 8.6% Operating margin, % 13.8% 15.6% 12.2% 12.9% Pretax margin, % 12.7% 14.5% 11.5% 12.2% Net margin, % 9.5% 10.7% 8.6% 9.1% Inventory days Receivable days Payable days See important disclosure at the back of this report 2

3 See important disclosure at the back of this report 3

4 Exhibit 6. Income Statement Revenue 83,306 92, , , ,434 COGS (65,084) (72,908) (81,237) (90,365) (100,312) Gross profit 18,222 19,873 21,887 23,965 26,121 EBITDA 13,363 14,080 15,135 16,434 17,986 Oper. profit 11,119 11,933 13,143 14,340 15,777 Interest income Interest expense (801) (785) (606) (544) (444) Forex Gain/(Loss) (15) Income From Assoc. Co s Other Income (Expenses) (33) Pre-tax profit 10,437 11,336 12,787 14,295 16,088 Income tax (2,681) (2,867) (3,234) (3,615) (4,068) Minority interest (2) Net profit 7,754 8,475 9,560 10,688 12,027 Core Net Profit 7,768 8,475 9,560 10,688 12,027 Exhibit 7. Balance Sheet Cash & cash equivalent 2,329 3,356 4,181 10,866 11,897 Receivables 2,229 2,542 2,825 3,132 3,464 Inventory 37,920 39,059 41,502 44,754 46,482 Other Curr. Asset 1, ,202 1,323 Fixed assets - Net 21,409 20,705 20,819 20,724 21,115 Other non-curr.asset 1, Total asset 66,760 67,163 71,004 81,471 85,160 ST Debt 20,600 13,917 10,312 11,433 6,322 Payables 1,215 1,604 1,575 2,606 2,220 Other Curr. Liabilities ,054 1,173 1,302 Long Term Debt Other LT. Liabilities 1,961 2,096 2,319 2,560 2,645 Total Liabilities 24,572 18,559 15,261 17,772 12,488 Shareholder'sFunds 42,171 48,468 55,613 63,575 72,557 Minority interests Total Equity & Liabilities 66,760 67,163 71,004 81,471 85,160 See important disclosure at the back of this report 4

5 Exhibit 8. Cash Flow Net income 7,754 8,475 9,560 10,688 12,027 Depreciation and Amort. 1,870 2,471 1,991 2,094 2,209 Change in Working Capital (419) (1,070) (2,757) (2,530) (2,447) OtherOper. Cash Flow 82 1, (74) (302) Operating Cash Flow 9,287 11,050 9,164 10,178 11,488 Capex (2,780) (1,768) (2,105) (2,000) (2,600) Others Inv. Cash Flow (901) 1, Investing Cash Flow (3,681) (631) (1,929) (1,580) (1,933) Net change in debt 847 (6,683) (3,605) 1,121 (5,111) New Capital (15) Dividend payment 5,001 2,210 2,415 2,725 3,046 Other Fin. Cash Flow (702) (531) (389) (309) (367) Financing Cash Flow 5,131 (4,972) (1,579) 3,536 (2,433) Net Change in Cash 10,737 5,446 5,656 12,134 7,122 Cash - begin of the year 1,595 2,329 3,356 4,181 10,866 Cash - end of the year 2,329 3,356 4,181 10,866 11,897 Exhibit 9. Key Ratios Year to 31 Dec 2017A 2018A 2019F 2020F 2021F Growth (%) Sales EBITDA Operating profit Net profit Profitability (%) Gross margin EBITDA margin Operating margin Net margin ROAA ROAE Leverage Net Gearing (x) (0.1) Interest Coverage (x) Source : GGRM, Danareksa Estimates See important disclosure at the back of this report 5