HMSP Greater Market Penetration 20180531 NHKS Company Report (English)
- –3–year average to obtain the target price of December 2018). The target price implies a 2018E P/E of 41.2x. HSMP currently is traded at a 2018E P/E of 34.7x.
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Abs. Ret. -18.6% 9.1% -20.1% 0.8% Rel. Ret. -14.1% 6.5% -12.1% -5.4%
BVPS (IDR) 294 293 297 306 EBITDA margin 17.5% 16.8% 16.0% 16.0% NPM 13.4% 12.8% 12.1% 12.1% ROE 37.3% 37.1% 37.3% 38.5% ROA 30.0% 29.4% 29.9% 30.7% ROIC 35.1% 35.0% 35.5% 36.6% P/E 34.9x 43.4x 34.7x 32.6x P/BV 13.0x 16.1x 12.9x 12.6x EV/EBITDA 26.3x 32.5x 26.0x 24.4x DPS (IDR) 89 108 107 109
EPS growth 23.1% -0.7% 1.9% 6.2%
EBITDA 16,745 16,696 16,992 18,064 Net profit 12,762 12,671 12,911 13,718 EPS (IDR) 110 109 111 118
Sales growth 7.2% 3.8% 7.3% 6.5%
Sales 95,467 99,091 106,283 113,216
2016/12A 2017/12A 2018/12E 2019/12E
Target Price of Rp4,575 We use an estimate of forward P/E of 38.9x (1SD from the last
HMSP Market Share Gets Bigger HMSP remains the top pick stock underlined by its success in expanding its market share from 33.0% in 1Q17 into 33.2% in 1Q18. The stellar sales of light flavor machine –rolled cigarette (SKM), namely Marlboro Filter Black and Dji Sam Soe Magnum Mild launched in May 2017 bolstered HMSP’s market share.
Soaring Excise Duties Mounts Inflation The total cigarette sales volume in Indonesia edged down 2.3% from 71 billion cigarettes in 1Q17 into 69.3 billion cigarettes in 1Q18. The tumble was attributable to the hike in excises duties mounting inflation in Indonesia. In 2018, it is estimated that the cigarette sales volume in Indonesia will edge down by 1% –3% in 2018.
Constrained Profit Margin HMSP posted the growth of 2.5% in sales from IDR22.5 trillion in the 1Q17 sales into IDR23.1 trillion in the 1Q18 sales. However, its net profit edged down by 8% from IDR 3.29 trillion in 1Q17 into IDR3.03 trillion in 1Q18. The hike of 11% in excise duties imposed on cigarette is the logical takeaway for the decline in profit growth because the soaring excise duties resulted in the soaring portion of excise duties to sales from 45% in 1Q17 into 51% in 1Q18.
12M
Please consider the rating criteria & important disclaimer NH Korindo Sekuritas Indonesia Company Report | May 31, 2018 Hanjaya Mandala Sampoerna Tbk (HMSP) Greater Market Penetration Buy Dec 2018 TP (IDR) 4,575 Consensus Price (IDR) 4,311 TP to Consensus Price +6.1% vs. Last Price +18.8% Shares data
3M
1M
Share Price Performance YTD
HM Sampoerna Tbk | Summary (IDR bn) Source: Company Data, Bloomberg, NHKS Research
joni.wintarja@nhsec.co.id
Consumer Staples Cigarette Bloomberg HMSP IJ Reuters HMSP.JK Joni Wintarja
92.67 Foreign Ownership 1.87%
23.35 Avg. Trd Val - 3M (bn)
7.5 Outstanding sh.(mn) 116,318 Market Cap (IDR bn) 443,171 Market Cap (USD mn) 31,825 Avg. Trd Vol - 3M (mn)
Last Price (IDR) 3,850 Price date as of May 28, 2018 52 wk range (Hi/Lo) 5,500/3,280 Free float (%)
Dividend yield 2.3% 2.3% 2.8% 2.8%
Company Report
VST Industries Ltd 699 123 9.2% 17.7% 36.9% 27.2x 8.5x 2.5% Godfrey Phillips India Ltd 645 340 -19.3% 6.0% 8.5% 30.7x 2.5x 1.0%
Sri Lanka
KT&G Corp 12,635 9,346 -5.4% 24.9% 15.7% 10.7x 1.6x 4.1%
South Korea
Japan Tobacco Inc 55,837 46,380 -6.9% 18.3% 15.0% 13.6x 1.9x 4.7%
Japan
British American Tobacco Bhd 1,936 257 -31.7% 16.4% 99.0% 15.4x 19.8x 9.4%
Malaysia
ITC Ltd 48,770 8,625 10.1% 24.3% 23.1% 30.7x 6.8x 1.8%
May 31, 2018
India
HMSP 31,825 3,175 1.9% 12.1% 37.3% 34.7x 12.9x 2.8% GGRM 10,886 4,649 8.5% 9.2% 19.2% 17.0x 3.1x 3.5%
Net Profit Margin ROE P/E P/BV Dividend Yield
Company Market Cap (USD mn) Total Asset (USD mn)
Net Profit
Growth
Source: Bloomberg, NHKS research
HMSP’s Competitiveness in Asia Passific Having market capitalization topping USD10 billion, HMSP has the first-highest ROE of 37.3%, then ITC Ltd in India has the second-highest ROE of 23.1%. Backed by vastly expanded markets shares and better cost efficiency, HMSP’s net profit likely nudges up 1.9% in 2018 HMSP high P/E valuation of 34.7x positions HMSP as the cigarette maker with the most expensive valuation in Asia Pacific. However, its free floating of 7.5% and expensive valuation point investors’ high interests in HMSP’s stock.
HMSP led the cigarette market share in Indonesia with the market share of 33.2%. It sells and distributes cigarette through 104 sales-area office across Indonesia.
Asia Pacific Cigarette Company A Glance at HMSP HMSP produces a number of prominent clove cigarette such as Sampoerna A, Sampoerna Kretek, Sampoerna U, and Dji Sam Soe the “Raja Kretek”. It is the affiliation of Philip Morris International Inc., an internationally prominent cigarette maker.
Ceylon Tobacco Co Plc 1,277 162 16.2% 10.5% 362.2% 13.6x 43.4x 6.2%
Company Report
May 31, 2018
Performance Highlights HMSP Quarterly Sales | 2016 - 2018 HMSP Quarterly Sales by Volume | 2016 - 2018
Source: Company, NHKS Research Source: Company, NHKS Research
HMSP Quarterly Net Profit | 2016 - 2018 Machine-made Clove Cigarettes Sales Growth | 2016 -
Source: Company, NHKS Research Source: Company, NHKS Research
Hand-rolled Clove Cigarettes Sales Growth | 2016 - 2018 White Cigarettes Sales Growth | 2016 - 2018
Source: Company, NHKS Research Source: Company, NHKS Research
Company Report
May 31, 2018
Multiple Valuation Forward P/E band | Last 3 Years Dynamic Forward P/E band | Last 3 Years
Source: NHKS research Source: NHKS research
Rating and target price update Target Price Revision
Date Rating Target Price Last Price Consensus vs Last Price vs Consensus
06/05/2017 Buy 4,620 (Dec 2017) 3,850 4,148 +20.0% +11.4% 08/07/2017 Hold 3,780 (Dec 2017) 3,470 4,080 +8.9% -7.4% 11/15/2017 Buy 4,690 (Dec 2018) 4,050 4,144 +15.8% +13.2% 03/16/2018 Buy 5,025 (Dec 2018) 4,310 4,552 +16.6% +10.4% 05/31/2018 Buy 4,575 (Dec 2018) 3,850 4,311 +18.8% +6.1%
Source: NHKS research, Bloomberg
Analyst Coverage Rating Closing and Target Price
Source: Bloomberg Source: NHKS research
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
Period: End of year target price Rating system based on a stock’s absolute return from the date of publication
Buy : Greater than +15% Hold : -15% to +15% Sell : Less than -15%
Company Report
ROA 30.0% 29.4% 29.9% 30.7% ROIC 35.1% 35.0% 35.5% 36.6% EBITDA/Equi ty 49.0% 48.9% 49.1% 50.7%
Summary of Financials
DISCLAIMER
May 31, 2018
HMSP Summary Last Price (IDR) 3,850
Target Price (IDR) 4,575 2016/12A 2017/12A 2018/12E 2019/12E
Rating: Buy ROE 37.3% 37.1% 37.3% 38.5%INCOME STATEMENT BALANCE SHEET
in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 39.4% 38.7% 39.3% 40.5%
Sales 95,467 99,091 106,283 113,216 Ca s h Di vi dend (IDR bn) 10,352 12,527 12,442 12,679
Growth (% y/y) 7.2% 3.8% 7.3% 6.5% Di vi dend Yi el d (%) 2.3% 2.3% 2.8% 2.8%
23 10 (6) Cos t of Debt (Ta x Adj.) 7.7% 6.6% 6.5% 11.3%
81
78
76 BVPS (IDR) 294 293 297 306 Other Non Current Li a b. 1,839 2,465 2,353 2,409 Sa l es PS (IDR) 821 852 914 973
Total Liabilities 8,333 9,028 8,622 9,001 DPS (IDR)
89 108 107 109
Shareholders' Equity 34,175 34,113 34,597 35,636
in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E
Net Income 12,762 12,671 12,911 13,718 DCF (IDR bn) Deprec & Amorti za ti on 724 598 643 675 NOPAT 12,019 12,072 12,311 13,068 Chg. In Worki ng Ca pi ta l 590 2,113 (1,268) (425) +Depr./Amor. 724 598 643 675
Ca pex (1,348) (708) (607) (693) -Incr. (Decr.) i n Worki ng Ca p. 590 2,113 (1,268) (425)
CFI (362) (386) (654) (670) (Unl evered) FCFF 11,985 14,076 11,079 12,625
Di vi dends Pa i d (10,352) (12,527) (12,442) (12,679) WACC Net Borrowi ng (PMT)
25
CFF (10,377) (12,550) (12,417) (12,685) Cos t of Equi ty (COE) 9.0% 11.5% 11.9% 11.9%
Net Changes in Cash 3,337 2,446 (785) 613 WACC (%) 9.0% 11.5% 11.9% 11.9%
RIMCOGS (71,612) (74,876) (81,176) (86,497) Pa yout Ra ti o (%) 99.9% 98.2% 98.2% 98.2%
Sprea d (FROE-COE) (%) 28.4% 25.7% 25.4% 26.6% Res i dua l Income (IDR bn) 9,690 8,751 8,780 9,463
By Geography % Shareholders % Equi ty Cha rge 3,072 3,920 4,131 4,255
Indones i a 98.1 Phi l i p Morri s Ind.
92.5 EVA Uni ted Sta tes
1.0 Schroder Inves tment
0.4 Inves ted Ca pi ta l (IDR bn) 34,262 34,222 34,716 35,749 Luxembourg
0.3 Va ntobel Hol di ng AG
0.3 ROIC-WACC (%) 26.1% 23.8% 23.5% 24.6% Ca na da
0.2 Bl a ckrock
0.3 EVA (USD mn) 8,939 8,140 8,166 8,800
CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY May 28, 2018 Dec 2018 Analyst: Joni Wintarja
66
37 Ba s i c EPS (IDR) 110 109 111 118 Other Current Li a b. 2,537 2,788 2,174 2,481 Di l uted EPS (IDR) 110 109 111 118 LT Debt
41
29
Gross Profit 23,855 24,216 25,107 26,719 DER 0.3% 0.3% 0.3% 0.3%
Gross Margin 25.0% 24.4% 23.6% 23.6% Net Gea ri ng 0.7% 0.8% 0.9% 0.8%
Opera ti ng Expens es (7,834) (8,119) (8,758) (9,329) LT Debt to Equi ty 0.2% 0.2% 0.2% 0.2%
EBIT 16,020 16,097 16,349 17,390 Ca pi ta l i za ti on Ra ti o 0.3% 0.3% 0.3% 0.3%
EBIT Margin 16.8% 16.2% 15.4% 15.4% Equi ty Ra ti o 80.4% 79.1% 80.1% 79.8%
Depreci a ti on 724 598 643 675 Debt Ra ti o 0.2% 0.3% 0.3% 0.3%
EBITDA 16,745 16,696 16,992 18,064 Fi na nci a l Levera ge 124.4% 126.5% 124.9% 125.3%
EBITDA Margin 17.5% 16.8% 16.0% 16.0% Current Ra ti o 523.4% 527.2% 555.0% 548.2%
Interes t Expens es (22) (9) (10) (11) Qui ck Ra ti o 130.3% 171.2% 170.9% 175.6%
EBT 17,011 16,895 17,146 18,254 Ca s h Ra ti o 78.7% 115.7% 108.5% 112.5%
Income Ta x (4,249) (4,224) (4,235) (4,537) Ca s h Convers i on Cycl e
92.1
83.2
83.2
79.2 Mi nori ty Interes t - - - - Pa r Va l ue (IDR)
4
4
4
4 Net Profit 12,762 12,671 12,911 13,718 Tota l Sha res (mn) 116,318 116,318 116,318 116,318
Growth (% y/y) 23.1% -0.7% 1.9% 6.2% Sha re Pri ce (IDR) 3,830 4,730 3,850 3,850
Net Profit Margin 13.4% 12.8% 12.1% 12.1% Ma rket Ca p (IDR tn) 445.5 550.2 447.8 447.8
in IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E
Ca s h 5,056 7,502 6,717 7,330 Pri ce /Ea rni ngs 34.9x 43.4x 34.7x 32.6x Recei va bl es 3,323 3,598 3,859 4,111 Pri ce /Book Va l ue 13.0x 16.1x 12.9x 12.6x Inventori es 19,442 18,023 19,540 19,636 Pri ce/Sa l es 4.7x 5.6x 4.2x 4.0x Other Current As s ets 5,827 5,057 4,242 4,650 PE/EPS Growth 1.5x -60.4x 18.3x 5.2x
Total Current Assets 33,647 34,180 34,358 35,726 EV/EBITDA 26.3x 32.5x 26.0x 24.4x
Net Fi xed As s ets 6,895 7,005 6,969 6,987 EV/EBIT 27.5x 33.7x 27.0x 25.3x Other Non Current As s ets
1,965 1,956 1,892 1,924 EV (IDR bn) 440,529 542,792 441,223 440,604
Total Assets 42,508 43,141 43,218 44,638 Sa l es CAGR (3-Yr) 8.4% 7.1% 6.1% 5.8%
Pa ya bl es 3,871 3,666 3,975 3,999 EPS CAGR (3-Yr) 5.7% 7.6% 7.6% 2.4% ST Debt
CFO 14,077 15,382 12,286 13,968 -CAPEX (1,348) (708) (607) (693)
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