HM SAMPOERNA. FY17 results meeting expectations. Exhibit 1 : Financial Highlights. Source : HMSP, Ciptadana Estimates

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1 HOLD TP: Rp5,130 (+8.9%) HM SAMPOERNA FY17 results meeting expectations Sector Bloomberg Ticker Share Price Performance Cigarette HMSP IJ Last price (Rp) 4,710 Avg. daily T/O (Rpbn/USDmn) 76.5/5.6 3m 6m 12m Absolute (%) Relative to JCI (%) w High/Low price (Rp) 5,550/3,350 6,000 5,000 4,000 3,000 2,000 1,000 0 Outstanding shrs (mn) 116,318 Mkt. Cap (Rpbn/USDmn) 547,858/39,821 Estimated free float (%) 7.5 Major shareholders PT Philip Morris Indonesia 92.5% Public 7.5% EPS Consensus Mar-17 Apr-17 May-17 Jun-17 Jul-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 HMSP Ciptadana Cons. % Diff 2018F F F Stella Amelinda ext. 740 amelindastella@ciptadana.com 10% 5% 0% -5% -10% -15% -20% -25% 1yr Rel. to JCI (RHS) HMSP reported in-line revenue and net profit in FY17 HM Sampoerna booked revenue growth of 3.79% YoY to Rp tn. This was in-line with our expectation but slightly below consensus, forming 96.4% and 93.7% of respective FY17F. Export segment experienced double-digit growth, up by 44.4% YoY to Rp 668 bn. As expected, machine-made cigarettes still benefit from strong demand, with a 8.6% increase in sales, contributing 67% to HMSP revenue. Hand-made clove cigarettes improved, recording slightly positive growth of 1.3%YoY. While white cigarettes sales tumbled by -13.7% YoY to Rp 12.1 tn compared to Rp 14 tn in the previous year. Gross profit and operating profit were relatively flat YoY at Rp24.2 tn (+1.5%YoY) and Rp 16.1 tn (+0.6%YoY), respectively. Below operating line, HMSP profitability was partly dented by lower other income, resulting from forex loss. As a result, net profit reported a negative growth of -0.7%YoY to Rp tn, which is in-line with our expectation as it formed 97% of our FY17F. Strong SKM demand supported HMSP performance In 2017, Indonesia cigarettes sales volume fell by 2.6%YoY due to the excise tax hike. HMSP sales volume weakened by 4% to bn sticks, which is relatively in line with our 2017F at bn sticks. However, HMSP is able to maintain the market share above 30% at 33% (-0.4%YoY). Looking at the quarterly result, in 4Q17 HMSP was able to lift up the gross profit margin by 0.6% QoQ. This is all thanks to the SKM division performance, especially Marlboro Filter Black and higher ASP for newly launched A-platinum (ASP+11% than A-mild). Smokers are moving away from more traditional hand rolled (SKT) to more modern machine rolled (SKM), especially Full Flavor SKM. We noticed that Marlboro Filter Black able to secure 1.4% market share in 2017(+0.4% YoY). We project SKM division will be able to deliver better performance in 2018 by +10.8% sales growth and higher contribution towards HMSP revenue by 68.6% (+1.7%YoY) in 2018F. New strategy for white cigarettes HMSP realized white cigarettes was experienced declining performance, as the sales fell by 13.7% YoY to only Rp12.1 tn, contributed 12.2% of total revenue in 2017(vs 14.7% in 2016). In the beginning of this year, Marlboro Fresh series which consists of Marlboro Menthol Lights, Marlboro Black Menthol and Marlboro Ice Blast was discontinuing due to the product sales inevitably decline for the past few years. Hence, HMSP decided to launch new Marlboro Ice Burst on 9th February 2018 to replace the three discontinued products; in order to reduce the liability risk in the future. We expect SPM could show an improvement in sales to Rp 12.3 tn(+2%) in 2018F. Maintain HOLD recommendation and TP of Rp5,130 Following in-line FY17 results, we maintain our FY18-19F earnings forecast as well as HOLD our rating on HMSP, as our TP of Rp5,130 offers limited upside potential from current price. HMSP currently trades at 2018F PER of 39x, a premium valuation compare to GGRM with 2018F PER of 22x. GGRM remains our top pick in cigarette industry on its cheaper valuation than HMSP and we saw its market share expanding. Exhibit 1 : Financial Highlights Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (Rpbn) 95,467 99, , , ,076 Operating profit (Rpbn) 16,020 16,111 18,617 20,244 21,663 Net profit (Rpbn) 12,762 12,671 14,102 15,333 16,415 EPS (Rp) EPS growth (%) EV/EBITDA (x) PER (x) PBV (x) Dividend yield (%) ROE (%) Source : HMSP, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 2

2 Exhibit 2: HMSP FY17 results (in Rp Bn) YoY 4Q17 3Q17 QoQ Old 2017F 17/17F Revenue 99,091 95, % 26,798 25, % 102, % Gross Profit 24,216 23, % 6,625 6, % 26, % Gross Profit Margin 24.4% 25.0% -0.5% 24.7% 24.1% 0.6% Opex -8,104-7, % 2,362 1, % Operating Profit 16,111 16, % 4,263 4, % 17, % Operating margin 16.3% 16.8% -0.5% 15.9% 16.4% -0.5% Finance Cost % % Others-net 809 1, % % Pre-tax profit 16,895 17, % 4,502 4, % 17, % Pre-tax margin 17.0% 17.8% -0.8% 16.8% 17.0% -0.2% Net Profit 12,671 12, % 3,333 3, % 13, % Net Margin 12.8% 13.4% -0.6% 12.4% 12.8% -0.4% Revenue breakdown: YoY 4Q17 3Q17 QoQ Machine made clove cigarettes 66,324 61, % 18,340 17, % Hand rolled clove cigarettes 19,592 19, % 5,262 5, % White cigarettes 12,101 14, % 2,844 2, % Export % % Others % % Exhibit 3: HMSP Key Assumptions Segment Revenue(Rp bn) F 2019F Export ,085 Machine made clove cigarettes 55,594 61,093 66,324 73,487 79,734 Hand rolled clove cigarettes 19,058 19,342 19,592 19,885 20,144 White cigarettes 13,336 14,030 12,101 12,343 12,565 Others Revenue Weight F 2019F Export 0.6% 0.5% 0.7% 0.8% 1.0% Machine made clove cigarettes 62.4% 64.0% 66.9% 68.7% 70.0% Hand rolled clove cigarettes 21.4% 20.3% 19.8% 18.6% 17.7% White cigarettes 15.0% 14.7% 12.2% 11.5% 11.0% Others 0.6% 0.6% 0.4% 0.4% 0.4% Sales Growth F 2019F Export 46.1% -17.4% 44.4% 30.0% 20.0% Machine made clove cigarettes 14.1% 9.9% 8.6% 10.8% 13.0% Hand rolled clove cigarettes 2.2% 1.5% 1.3% 1.5% 2.0% White cigarettes 9.8% 5.2% -13.7% 2.0% 2.0% Others -34.1% 3.5% -24.5% 5.0% 5.0% Please see analyst certification and other important disclosures at the back of this report 3

3 Exhibit 4: HMSP Quarterly Performance 30, % 25, % 20, % 15,000 10, % 10.00% Revenue (Rpbn) Gross Margin 5, % Operating Margin 0 1Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q % Net Margin Exhibit 5: HMSP Segment Contribution 80.00% 70.00% 60.00% Export 50.00% 40.00% 30.00% 20.00% 10.00% Machine made clove cigarettes Hand rolled clove cigarettes White cigarettes Others 0.00% F 2019F Exhibit 6: HMSP PE Band x 32.9x 26.4x 19.9x 13.5x Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Source: Bloomberg and Ciptadana Sekuritas Asia Please see analyst certification and other important disclosures at the back of this report 4

4 Exhibit 7 - Income Statement Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F Revenue 95,467 99, , , ,076 COGS -71,612-74,876-78,303-82,610-87,154 Gross profit 23,855 24,216 28,708 31,366 33,923 Oper. expenses -7,834-8,104-10,091-11,122-12,260 Oper. profit 16,020 16,111 18,617 20,244 21,663 EBITDA 16,754 16,976 19,483 21,112 22,533 Interest income Interest expense Other income (exp.) Pre-tax profit 17,011 16,895 18,797 20,438 21,880 Income tax -4,249-4,224-4,695-5,105-5,465 Minority interest Net profit 12,762 12,671 14,102 15,333 16,415 Exhibit 8 - Balance Sheet Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F Cash & cash equivalent 6,691 9,876 7,832 9,479 12,209 Acct, receivables 3,323 3,598 3,724 3,967 3,981 Inventory 19,442 18,023 21,259 22,407 22,684 Other curr, asset 4,192 2,683 4,699 4,568 4,853 Total current asset 33,647 34,180 37,514 40,421 43,727 Fixed assets - net 6,895 6,891 7,024 7,156 7,286 Other non-curr.asset 1,318 1,525 1,470 1,562 1,655 Total asset 42,508 43,141 46,734 49,911 53,489 ST debt + curr. maturity Acct, payable 3,871 3,666 4,984 5,308 5,971 Advances received Other curr. liab 2,537 2,788 2,844 3,029 3,218 Long term debt Other non-curr, liab, 1,807 2,239 2,025 2,157 2,291 Total liabilities 8,333 9,028 9,997 10,653 11,654 Shareholder equity 34,175 34,113 36,737 39,259 41,835 Minority interest Total liab + SHE 42,508 43,141 46,734 49,911 53,489 Exhibit 9 - Per Share Data (Rp) 2016A 2017A 2018F 2019F 2020F EPS BVPS DPS FCF per share Source : HMSP, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 5

5 Exhibit 10 - Cash Flow Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F Net income 12,762 12,671 14,102 15,333 16,415 Depreciation Chg in working cap. 1,807 2,330-1, Other CF-Oper activities 14,471 15,777 13,059 15,464 17,568 Capital expenditure -1, ,000-1,000-1,000 Others CF-Investing activities , Net change in debt Net change in equity Dividend payment -10,352-12,527-11,439-12,438-13,315 Other financing CF-Financing activities -10,633-12,542-11,694-12,824-13,851 Net cash flow 3,337 2, ,647 2,730 Cash - begin of the year 1,719 5,056 7,502 7,832 9,479 Cash - end of the year 5,056 7,502 7,832 9,479 12,209 Exhibit 11 - Key Ratios Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Growth Revenue (%) Operating profit (%) Net profit (%) Profitability Ratios Gross margin (%) Operating margin (%) EBITDA margin (%) Net margin (%) ROA (%) ROE (%) Liquidity Ratios Current ratio (x) Quick ratio (x) Cash conversion cycle (days) Activity Ratio Inventory turnover (days) Receivable turnover (days) Payable turnover (days) Solvency Ratio Interest cover (x) Debt to equity ratio (x) Net debt to equity (x) Net Cash Net Cash Net Cash Net Cash Net Cash Source : HMSP, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 6

6 HEAD OF RESEARCH ANALYST ANALYST Arief Budiman Erni Marsella Siahaan, CFA Yasmin Soulisa Strategy, Automotive, Heavy Equipment, Banking Property, Plantations Construction, Shipping T ext 919 T ext 799 T ext 819 E siahaanerni@ciptadana.com E soulisayasmin@ciptadana.com E budimanarief@ciptadana.com ECONOMIST ANALYST ANALYST Imanuel Reinaldo Niko Margaronis Fahressi Fahalmesta T ext 820 Telecommunication, Tower, Healthcare Cement, Toll Road, Poultry E reinaldoimanuel@ciptadana.com T ext 734 T ext 735 E margaronisniko@ciptadana.com E fahalmestafahressi@ciptadana.com ANALYST ANALYST TECHNICAL ANALYST Stella Amelinda Fransisca Maharani Putri Trevor Gasman Consumer Media, Retail T ext 934 T ext 740 T ext 760 E gasmantrevor@ciptadana.com E amelindastella@ciptadana.com E putrifransisca@ciptadana.com RESEARCH ASSISTANT Sumarni T ext 920 E sumarni@ciptadana.com EQUITY SALES Co HEAD OF INSTITUTIONAL SALES Dadang Mulyana Plaza ASIA Office Park unit 2 Plaza ASIA Office Park unit 2 Jl. Jend. Sudirman Kav. 59 Jl. Jend. Sudirman Kav. 59 Jakarta Jakarta T ext 838 T ext 807 Co HEAD OF INSTITUTIONAL SALES The Fei Ming F F E mulyanadadang@ciptadana.com E thefeiming@ciptadana.com BRANCH OFFICES JAKARTA - MANGGA DUA JAKARTA - PURI KENCANA SURABAYA Komplek Harco Mangga Dua Perkantoran Puri Niaga III Intiland Tower Surabaya Rukan Blok C No.10 Jl. Puri Kencana Blok M8 No.2E Ground Floor Suite 5 & 6 Jl. Mangga Dua Raya Kembangan Jl. Panglima Sudirman Jakarta Jakarta Surabaya T T T F F F SEMARANG Gedung Menara Suara Merdeka 6th Floor Unit 02 Jl. Pandanaran No.30 Semarang T F Please see analyst certification and other important disclosures at the back of this report 7

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