Kalbe Farma(KLBF IJ) BUY(Unchanged) Not a Fruitful Year. Equity Indonesia Consumer. Results Note. 29 February 2016

Transcription

1 Equity Indonesia Consumer Kalbe Farma(KLBF IJ) BUY(Unchanged) Stock Data Target price (Rp) Prior TP (Rp) Shareprice (Rp) Rp1,600 Rp1,710 Rp1,275 Upside/downside (%) Sharesoutstanding (m) 47 Marketcap. (US$ m) 4 Free float (%) 43.3 Avg. 6m dailyt/o (US$ m) 5.1 Price Performance 3M 6M 12M Absolute (%) Relative to JCI (%) w high/low (Rp) 1,905-1, Mar-15 Mar-15 Apr-15 May-15 May-15 Jun-15 Major Shareholders Kalbe's Founders 56.7% Estimate Change; Vs. Consensus 2016F 2017F Latest EPS (Rp) Vs. Prior EPS (%) (16.1) (7.1) Vs. Consensus (%) (2.1) (6.1) Source: Bloomberg Jul-15 KLBF-Rebase Jul-15 Aug-15 Sep-15 Sep-15 Oct-15 Nov-15 Nov-15 Dec-15 Jan-16 JCI Index-Rebase Jan-16 Feb-16 Not a Fruitful Year Earnings fell 4.3% in FY15, weaker than expected Revenue growth slowed to 3%, margins fell Nutritional division still the main growth driver Maintain BUY with TP Rp1, February 2016 Results Note Weak results. KLBF reported unaudited net profit of Rp1.97tn in FY2015 (-4.3% YoY) on the back of slow revenue growth of 3% due to economic slowdown during 2015, which is 5.4%/4.4% below our/consensus expectations. All divisions reported flat to negative revenue growth except nutritionals division (+11.6% YoY; 0.6%QoQ). The growth was largely driven by volume growth as there was no ASP increase in all divisions during 2015 except a small 2-3% ASP hike for some products in the nutritional divisions. However, we expect revenue growth to slowly recover this year due to a better economic outlook and an expected recovery in consumers purchasing power. Margins under pressure. Gross margin fell 90 bps to 47.9% (FY14: 48.8%), likely due to higher expenses on raw materials as almost 70% of raw materials are imported. Operating expense was stable compared to last year with selling and marketing expenses maintained at 26.9% of sales in an effort to maintain brand awareness. R&D expenses slightly increased to 0.9% of total sales from 0.8% in the previous year. Due to unfavorable economic conditions during 2015, the company focused more on improving efficiency. Earnings downgrades. We reduce our FY16F and FY17F earnings forecasts by 16% and 6.7% respectively. We expect the nutritionals division will continue to book double-digit growth and remain the main growth driver going forward. However, we also expect the consumer health division to perform better due to double-digit growth from newly launched products such as: Love Juice, Hydro Coco and Extra Joss Blend. We forecast gross profit margin to recover to the 48.4% level on lower raw material expenses and currency recovery. In addition, we are still positive on National Healthcare Program contribution to the pharma division as unbranded generics accounted for 14% of pharma s sales. Maintain BUY at Rp1,600. We cut our target price to Rp1,600 (from Rp1,710) which implies 36x 2016F P/E. We still like the stock due to the company s strong track record, good governance, healthy balance sheet and our forecast for earnings growth recovery in the next two years. Note that KLBF had a hefty cash reserve of Rp2.3tn at the end of We view the company s growth will further be supported by its promising growth driver in oncology, better product mix, exports, e-store and clinics expansions. In addition, the biosimilar factory, which is currently undergoing construction, should eventually lessen reliance on imported raw materials, resulting in lower COGS going forward. Sandra Thio PT Indo Premier Securities sandrathio@ipc.co.id Year To 31 Dec 2014A 2015A 2016F 2017F 2018F Revenue (RpBn) 17,369 17,888 19,576 21,621 24,387 EBITDA (RpBn) 3,007 2,937 3,157 3,530 4,386 EBITDA Growth (%) 10.0 (2.3) Net Profit (RpBn) 2,065 1,920 2,194 2,440 3,098 EPS (Rp) EPS Growth (%) 12.0 (7.0) Net Gearing (%) (15.4) (26.7) (27.2) (34.9) (40.3) PER (x) PBV (x) Dividend Yield (%) EV/EBITDA (x) Source: KLBF, IndoPremier Share Price Closing as of : February 27, 2016

2 Fig. 1: Sales breakdown per division 2015FY Fig. 2: Flat to negative growth YoY except nutritionals Distribution, 31.18% Pharma, 22.81% Nutritionals, 30.45% Consumer Health, 15.56% Pharma Cons. Health Nutritionals Distribution Fig. 3: OpEx to Sales Ratio Trend Fig. 4: Net Profit Margin Comparison 100% R&D G&A Selling Expense 25 KLBF UNVR TSPC SIDO 80% 20 60% 15 40% 10 20% 5 0% F 2017F 2018F 2019F 2020F F Source: Indo Premier Forecasts, Bloomberg KLBF and UNVR (UNVR IJ; Rp43,900, HOLD) are IP forecasts; TSPC (TSPC IJ, Rp17,500, Not Rated) and SIDO (SIDO IJ, Rp500, Not Rated) are based on consensus Fig. 5: Improving Profit Margin Trend Fig. 6: New Products in Consumer Health to boost sales F 2017F 2018F 2019F 2020F 2021F 2022F, Indo Premier 2

3 Fig. 7: Earnings result (in Rp bn) YoY 4Q15 3Q15 QoQ vs. Forecast 2015 vs. Consensus 2015 Revenue 17,888 17, % 4,760 4, % 97.2% 96.8% Gross Profit 8,574 8, % 2,163 2, % Operating Profit 2,641 2, % % Net Profit 1,975 2, % % 94.6% 95.6% FY15 FY14 4Q15 3Q15 Gross Margin (%) 47.9% 48.8% 45.4% 47.9% Operating Margin (%) 14.8% 15.9% 13.1% 13.6% Net Margin (%) 11.0% 11.9% 10.0% 9.9%, Indo Premier Fig. 8: Earnings Revision Old New Change (%) FY16F FY17F FY16F FY17F FY16F FY17F Sales 20,645 23,224 19,576 21, % 4.7% Prescription Pharma 5, ,636 5, % -3.4% Consumer Health 3, ,373 3, % -0.6% Nutritionals 6, ,881 6, % 8.8% Distribution 5, ,686 6, % 11.4% Gross profit 10,512 12,082 9,465 10, % -10.0% Prescription Pharma 3, ,782 3, % -12.1% Consumer Health 2, ,855 2, % -9.6% Nutritionals 3, ,293 3, % -8.7% Distribution 1, ,535 1, % -9.1% Operating profit 3,380 4,031 2,828 3, % -6.4% Net profit 2,614 3,105 2,194 2, % -6.7% Margins Gross margin (%) 50.9% 52.0% 48.4% 48.5% -2.6% -2.4% Prescription Pharma (%) 61.0% 61.0% 60.0% 60.0% -1.0% -1.0% Consumer Health (%) 55.0% 55.0% 55.0% 55.0% 0.0% 0.0% Nutritionals (%) 58.0% 60.0% 56.0% 56.0% -2.0% -2.0% Distribution (%) 30.6% 30.7% 27.0% 27.0% -3.6% -3.6% Operating margin (%) 16.4% 17.4% 14.4% 14.6% -1.9% -2.7% Net margin (%) 12.7% 13.4% 11.2% 11.3% -1.5% -2.1%, Indo Premier 3

4 Year To 31 Dec (RpBn) 2014A 2015A 2016F 2017F 2018F Income Statement Net Revenue 17,369 17,888 19,576 21,621 24,387 Cost of Sales (8,893) (9,314) (10,111) (11,131) (12,250) Gross Profit 8,476 8,574 9,465 10,490 12,137 SG&A Expenses (5,715) (5,934) (6,637) (7,326) (8,130) Operating Profit 2,761 2,640 2,828 3,165 4,007 Net Interest Forex Gain (Loss) 14 (83) Others-Net (22) (22) (22) (22) (22) Pre-Tax Income 2,764 2,604 2,934 3,264 4,143 Income Tax (643) (630) (682) (759) (963) Minorities (56) (54) (58) (65) (82) Net Income 2,065 1,920 2,194 2,440 3,098 Balance Sheet Cash & Equivalent 1,895 2,917 3,465 4,783 6,001 Receivable 2,347 2,379 2,574 2,843 3,207 Inventory 3,091 3,218 3,490 3,355 3,692 Other Current Assets ,050 1,155 Total Current Assets 8,121 9,381 10,484 12,030 14,054 Fixed Assets - Net 2,926 3,404 3,728 4,109 4,143 Goodwill Non Current Assets ,089 Total Assets 11,939 13,685 15,201 17,129 19,287 ST Loans Payable 1,531 1, ,496 1,647 Other Payables 526 1,001 1,101 1,211 1,332 Current Portion of LT Loans Total Current Liab. 2,641 2,386 2,996 3,207 3,479 Long Term Loans Other LT Liab Total Liabilities 2,815 2,608 3,191 3,422 3,715 Equity Retained Earnings 7,633 8,901 9,947 11,252 12,595 Minority Interest Total SHE + Minority Int. 8,500 9,817 10,907 12,260 13,656 Total Liabilities & Equity 11,315 12,425 14,098 15,681 17,371 Source: KLBF, IndoPremier 4

5 Year to 31 Dec 2014A 2015A 2016F 2017F 2018F Cash Flow Net Income (Excl.Extraordinary&Min.Int) 2,121 1,974 2,252 2,505 3,180 Depr. & Amortization Changes in Working Capital 370 (564) (213) (41) (559) Others (105) (279) 264 (165) (218) Cash Flow From Operating 2,571 1,377 2,599 2,627 2,769 Capital Expenditure (1,026) (732) (710) (710) (499) Others Cash Flow From Investing (963) (639) (604) (564) (315) Loans 379 (288) Equity (41) Dividends (797) (929) (889) (1,097) (1,220) Others Cash Flow From Financing 296 (1,189) (648) (1,054) (1,170) Changes in Cash 1,904 (451) 1,347 1,009 1,283 Financial Ratios Gross Margin (%) Operating Margin (%) Pre-Tax Margin (%) Net Margin (%) ROA (%) ROE (%) ROIC (%) Acct. Receivables TO (days) Acct. Receivables - Other TO (days) Inventory TO (days) Payable TO (days) Acct. Payables - Other TO (days) Debt to Equity (%) Interest Coverage Ratio (x) Net Gearing (%) (15.4) (26.7) (27.2) (34.9) (40.3) Source: KLBF, IndoPremier 5

6 Head Office PT INDO PREMIER SECURITIES Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta Indonesia p f Institutional Equity & Private Client Benny B. Soebagjo Head of Equities benny.soebagjo@ipc.co.id Angkula Ruriawan Equity Sales angkula.ruriawan@ipc.co.id Alexander Salim Equity Sales alexander.salim@ipc.co.id Edward Azizy Equity Sales edazizy@ipc.co.id Henry Sutanto Equity Sales henry.sutanto@ipc.co.id Isna Alfiathi Equity Sales isna.alfiathi@ipc.co.id Angky Amarylis Sales Trader angky.amarylis@ipc.co.id Thomas Samuil Sales Trader thomas.samuil@ipc.co.id INVESTMENT RATINGS BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMERS This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Securities or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.