HM Sampoerna (HMSP IJ)
O c t- 1 7 N o v -1 7 D e c -1 7 D e c -1 7 J a n -1 8 F e b -1 8 M a r- 1 8 M a r- 1 8 A p r- 1 8 M a y -1 8 M a y -1 8 J u n -1 8 J u l- 1 8 J u l- 1 8 A u g -1 8 S e p -1 8 S e p -1 8 O c t- 1 8 HMSP-Rebase JCI Index-Rebase
12.9
2.8
9.9
7.1 Net Profit (RpBn) 12,762 12,670 13,020 14,261 15,233 EPS (Rp) 115 114 117 128 137 EPS Growth (%) 23.1 (0.7)
2.8
9.5
6.8 Net Gearing (%) (14.5) (21.7) (17.4) (17.3) (17.1) PER (x)
34.5
34.7
33.8
30.8
28.9 PBV (x)
12.9
12.9
12.4
13.9
12.1 Dividend Yield (%)
2.4
2.8
2.9
2.9
3.2 EV/EBITDA (x)
26.4
26.1
25.4
23.1
21.6 Source : HMSP,IndoPremier Share Price Closing as of : 26-October-2018
E q u it y | I n d o n e s ia | T o b a c c o
80
90 100 110 120 130 140 150
1.4
Revenue (RpBn) 95,467 99,091 103,920 110,538 116,544 EBITDA (RpBn) 16,745 16,977 17,444 19,166 20,527 EBITDA Growth (%)
StockData
0.5 Relative to JCI (%)
Target price (Rp) Rp4,200
Prior TP (Rp) Rp3,950
Shareprice (Rp) Rp3,920
Upside/downside (%) +7.1
Sharesoutstanding (m) 111 Marketcap. (US$ m)
29 Free float (%)
7.5 Avg. 6m dailyT/O (US$ m)
4.5 Price Performance
3M
6M
12M
Absolute (%) (0.5)
10.7
3.5
Year To 31 Dec 2016A 2017A 2018F 2019F 2020F
14.2
4.6 52whigh/low (Rp) 3,920 - 3,280
Major Shareholders
Phillips Morris Indonesia 92.5% Public 7.5%
Estimate Change; Vs. Consensus 2018F 2019F
Latest EPS (Rp) 117 128 Vs. Prior EPS (%) +1 +5 Vs. Consensus (%) -2.1 -3.6
Source: Bloomberg Radit Immanzah
PT Indo Premier Sekuritas [email protected]
Modest Improvement Profit grew 3.8% driven by price rises, volume recovery Lower gross margin due to 15% excise tax hike for 2018 Upgrade earnings on higher cigarette price increase this year Maintain Buy with higher TP of Rp4,200 (from Rp3,950) Result in-line.HM Sampoerna reported earnings of Rp9.6tn in 9M18 (+3.8% yoy), in-line with our/consensus estimates while revenue grew +7% mainly driven by cigarette price rises (ASP: +7% yoy). According to the company, cigarette sales grew 1% yoy to 26.5bn sticks in 3Q18vs25.0bn in 2Q (1Q: 23bn). This was in-line with industry trend of improving 3Q18 sales (80.3bn; +1.4% yoy) after negative growth in 1H18. We suspect the sales turnaround could be due to major events such as Asian Games and the end of fasting season. Worth to note that this also a catalyst that Indonesian economic environment is remain strong during 9M18.
Lower gross margin.HMSP’s gross profit margin (GPM) of 23.6% in 9M18was slightly lower compared to last year (9M17: 24.3%) due to significant increase in cigarette excise tax of 15% in 2018. Machine-rolled cigarettes (SPM) contributed 71%, which was higher, compared to last year (68%), which we believe can be attributed to Dji Sam Soe Magnum Mild 16s variant that continued to perform strong in 3Q18 with 9.4% market share ytd.
Upgrade earnings. We upgrade our FY18F earnings by 3% as we revise up our FY18F selling price increase to 6% from 5.5% previously. This is the result from our findings in modern trade (MT) that they increased selling prices of HM Sampoerna products in less than four weeks. We believe that selling price of several products will increase higher-than-inflation.Our findings also show that the recent trend towards e-cigaretteshas started to diminish as our findings show that people are shifting back to conventional cigarettes due to regulated e-cigarettes segment and expensive price point. We believe HM Sampoerna will be one of the beneficiaries of the shifting.
Maintain BUY, upgrade TP toRp,4,100.We maintain our Buy call for HMSP and upgrade TP 4,200, which implies FY19F P/E of 33.5x. We believe that industry volumes will recover despite increasing competition going forward. We expect strong economy environment as major catalyst for the industry. Key risks for our call are slowing macro-economy condition and higher than expected excise tax hike.
HM Sampoerna
(HMSP IJ)
29 October 2018 Results Note BUY (Unchanged)
- 62 21 5793 1168
Fig. 1: Industry segmentation Fig. 2: Industry SKM breakdown
SKT (%, LHS) SPM (%, LHS) SKM (%, RHS) SKM Low Tar (%, LHS) SKM High Tar (%, RHS)
25.00% 79.00%
60.0% 52.0%
78.00% 50.0%
20.00% 55.0%
77.00% 48.0%
15.00% 76.00%
46.0% 50.0%
44.0% 75.00%
10.00% 42.0%
74.00% 45.0%
5.00% 40.0%
73.00% 40.0%
38.0% 0.00%
72.00% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2015 2016 2017 2018 2015 2016 2017 2018
Source: Company, IndoPremier Source: Company, IndoPremier Fig. 3: Industry SKM segment, Indonesian favour full flavour Fig. 4: HMSP market share
SKM Low Tar (%, LHS) SKM High Tar (%, RHS) 34.7%
35.0% 34.4%
45.00% 45.00%
34.5% 40.00%
44.00% 34.6%
35.00% 33.7%
34.0% 43.00%
33.6% 30.00%
33.4% 42.00%
33.2% 33.2% 25.00% 33.5%
33.1% 33.0%
33.0% 20.00%
41.00% 32.8%
33.5% 33.0%
15.00% 33.2%
40.00% 10.00%
32.5% 32.9% 39.00%
5.00% 32.0%
38.00% 0.00%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 31.5%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2017 2018 2015 2016 2017 2018
Source: Company, IndoPremier Source: Company, IndoPremier Fig. 5: HMSP sales and sales growth Fig. 6: HM Sampoerna9M18 Sales
30,000 20.0% Others
SPM 0%
1%
10%
25,000 15.0% 17.7% 11.7% 14.6%
10.9% 20,000 10.0% 6.7%
12.1%
SKT
10.8% 10% 7.0% 8.4% 19%
15,000 5.0% 6.4% 6.2% 5.3%
5.0% 3.7% 10,000 3.0% 0.0% 2.5%
1.7% 5,000
- 5.0%
SKM
- 5.5%
70%
- 10.0% - Sales (Rp Bn; LHS) Sales YOY Growth (%; RHS)
Source: Company, IndoPremier Source: Company, IndoPremier
HMSP Result summary
9M18
9M17 yoy(%)
3Q18
2Q18 qoq(%) % to Ours % to Cons
Total Sales (in RpBln) 77,535 72,294 7.2% 28,378 26,021 9.06% 74.9% 72.9% COGS (in RpBln) 59,227 54,703 8.3% 21,499 20,088 7.02% 74.7% 73.5% Gross Profit (in RpBln) 18,308 17,591 4.1% 6,879 5,933 15.95% 75.4% 71.0% Margin (%) 23.6% 24.3% 24.2% 22.8% OPEX (in RpBln) 6,196 5,742 7.9% 2,308 2,168 6.48% 78.1% 68.9% As of sales (%) 8.0% 7.9% 8.1% 8.3% EBIT (in RpBln) 12,112 11,849 2.2% 4,571 3,765 21.40% 74.1% 72.2% Margin (%) 15.6% 16.4% 16.1% 14.5% Earnings (in RpBln) 9,690 9,338 3.8% 3,577 3,081 16.11% 75.5% 73.6% Margin (%) 12.5% 12.9% 12.6% 11.8%
HMSP Earning change Old New Old New 2018 2018 % change 2019 2019
% change Total Sales (in RpBln) 103,580 103,920 0.33% 109,088 110,538 1.3% COGS (in RpBln) 79,296 79,387 0.11% 83,149 83,517 0.4% Gross Profit (in RpBln) 24,284 24,534 1.03% 25,939 27,022 4.2% Margin (%) 23.4% 23.6% 23.8% 24.4% OPEX (in RpBln) 7,935 7,940 0.06% 8,744 8,773 0.3% As of sales (%) 7.7% 7.6% 8.0% 7.9% EBIT (in RpBln) 16,349 16,594 1.50% 17,195 18,249 6.1% Margin (%) 15.8% 16.0% 15.8% 16.5% Earnings (in RpBln) 12,836 13,020 1.43% 13,471 14,261 5.9% Margin (%) 12.4% 12.5% 12.3% 12.9%
Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement
Net Revenue 95,467 99,091 103,920 110,538 116,544 Cost of Sales (71,612) (74,875) (79,387) (83,517) (87,480) Gross Profit 23,855 24,216 24,534 27,022 29,064 SG&A Expenses (7,834) (8,104) (7,940) (8,773) (9,520) Operating Profit 16,020 16,112 16,594 18,249 19,544 Net Interest 832 791 775 775 775 Forex Gain (Loss) Others-Net 159 (9) (9) (9) (9) Pre-Tax Income 17,011 16,894 17,360 19,015 20,310 Income Tax (4,249) (4,224) (4,340) (4,754) (5,078) Minorities Net Income 12,762 12,670 13,020 14,261 15,233
Balance Sheet
5,056 7,501 6,015 6,237 6,335 Cash & Equivalent
4,996 3,781 4,518 4,806 5,067 Receivable
19,442 18,023 19,847 20,879 21,870 Inventory
4,153 4,875 3,469 3,596 3,711 Other Current Assets
33,647 34,180 33,848 35,517 36,982 Total Current Assets
6,895 6,891 6,991 7,024 6,991 Fixed Assets - Net
60
60
60
60
60 Goodwill 1,843 1,947 1,947 1,947 1,947
Non Current Assets 42,508 43,141 42,909 44,611 46,043
Total Assets ST Loans
3,871 3,666 4,176 4,374 Payable
2,537 2,787 2,392 2,517 2,636 Other Payables
21
29
29
29
29 Current Portion of LT Loans 6,428 6,482 6,391 6,722 7,039 Total Current Liab.
66
81
81
81
81 Long Term Loans 1,839 2,465 2,465 2,465 2,465 Other LT Liab. 8,333 9,027 8,936 9,267 9,585
Total Liabilities 21,549 21,531 20,914 20,914 20,914
Equity 12,626 12,582 13,058 14,430 15,544
Retained Earnings Minority Interest
34,175 34,113 33,972 35,344 36,458 Total SHE + Minority Int. Total Liabilities & Equity 42,508 43,140 42,909 44,611 46,043
Source : HMSP,IndoPremier
Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Cash Flow
12,762 12,670 13,020 14,261 15,233 Net Income (Excl.Extraordinary&Min.Int) 595 598 850 917 983 Depr.& Amortization 126 624 (860) (1,229) (1,158) Changes in Working Capital
(3,443) 1,144 559 (1,161) (662) Others
10,040 15,036 13,569 12,788 14,396 Cash Flow From Operating
(1,252) (698) (950) (950) (950) Capital Expenditure 854 815 800 800 800 Others
(398) 117 (150) (150) (150) Cash Flow From Investing
(608)
23
1 Loans (19) (18)
Equity (10,352) (12,527) (12,543) (12,890) (14,119)
Dividends 361 600 (642) (25) (25) Others
(10,618) (11,922) (13,185) (12,915) (14,144) Cash Flow From Financing
(976) 3,231 234 (277) 102 Changes in Cash
FinancialRatios
25.0
24.4
23.6
24.4
24.9 Gross Margin (%)
16.8
16.3
16.0
16.5
16.8 Operating Margin (%)
17.8
17.0
16.7
17.2
17.4 Pre-Tax Margin (%)
13.4
12.8
12.5
12.9
13.1 Net Margin (%)
31.7
29.6
30.3
32.6
33.6 ROA (%)
38.6
37.1
38.2
41.1
42.4 ROE (%)
40.6
39.4
40.5
43.3
44.5 ROIC (%)
18.6
16.2
14.6
15.4
15.5 Acct. Receivables TO (days)
0.0
0.0
0.0
0.0
0.0 Acct. Receivables - Other TO (days)
3.7
4.0
4.2
4.1
4.1 Inventory TO (days)
18.0
18.4
17.6
17.8
17.8 Payable TO (days)
0.0
0.0
0.0
0.0
0.0 Acct. Payables - Other TO (days)
0.3
0.3
0.3
0.3
0.3 Debt to Equity (%)
0.0
0.0
0.0
0.0
0.0 Interest Coverage Ratio (x) (14.5) (21.7) (17.4) (17.3) (17.1)
Net Gearing (%)
Source : HMSP,IndoPremier
Head Office PT INDO PREMIER SEKURITAS WismaGKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta 10210 - Indonesia p +62.21.5793.1168 f +62.21.5793.1167
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 Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.