MNCS COMPANY UPDATE - mncsekuritas.id · Page 2 Company Update Report | MNC Sekuritas Research Division Please see important disclaimer at the back of this report Up to 1Q18, PT Sido

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MNCS COMPANY UPDATE

MNC Sekuritas Research Division May 11, 2018

Please see important disclaimer at the back of this report

Key Financial Highlight

1Q18 : Softer Top Line, Stronger Bottom Line SIDO successfully booked revenues of IDR620.84 billion (+2.88% YoY), supported by the growth of herbal product segment, contributing 65.68% to total sales in 1Q18. This 1Q18 revenue reflects 22.50%/22.61% of MNCS/Consensus estimates. SIDO also successfully managed to maintain its operational performance, so that gross profit increased by 17.77% YoY from IDR259.73 billion to IDR305.89 billion, with a maintained margin of 49.27% (vs 43.04% in 1Q17). The efficiency of SIDO has an impact on net profit increase by 32.57% YoY in 1Q18, with a net profit margin maintained at 27.23% level (vs 21.13% in 1Q17), which representing 27.08%/30.78% of MNCS/Consensus estimate. When Local Go International Attracts FDI Interest In order to expand its market, SIDO exported the Tolak Angin products to 12 countries and targeting a 5% revenues contribution this year (vs 2.5% in FY17). As the first step to strengthen sales in the regional market, SIDO planned to open a new marketing office in the Philippines in 1Q18. Promising business development, supported by good fundamentals has turned out to attract Affinity Equity Partners, a foreign private equity, to collaboration with SIDO. We see this could have a positive impact on SIDO in developing domestic and export markets supported by more than 250 products, with proven track record in their flagship products like Tolak Angin and Kuku Bima Energi. Recommendation HOLD with Target Price IDR810 We recommend HOLD for SIDO at a TP: IDR810 which implies PE/PBV 19.48x/3.97x in FY18E and 16.98x/3.73x in FY19E. We believe a strong brand and the potential of entering the international market will become a positive catalyst for SIDO. SIDO also offers 3-5% dividend yield in the last three years to attracts investor. On the other hand, rampant circulation of illegal herbal products that are free to circulate can threaten the well-being of the herbal medicine industry. SIDO is currently trading at a level of +2 STD (average 3-years PE) with PE of 21.73x.

PT Industri Jamu dan Farmasi Sidomuncul Tbk (SIDO) Consumer : Pharmacy

When Local Go International

HOLD

Stock Data

Target Price : IDR 810

Current Price : IDR 840

52wk Range H-L : IDR 850-436

Share Outstanding : 15,000 mn

Free Float (%) : 18.40%

Mkt Capitalization (IDR bn)

: 12,600

Major Shareholders

Research Analyst

Victoria Venny N.S. [email protected] (021) 2980 3111 ext. 52236 Source: Bloomberg, MNCS as of May 11, 2018

Public : 18.40%

PT Hotel Candi Baru

: 81.60%

www.mncsekuritas.id MNC Sekuritas 1-500-899 [email protected]

In billion IDR FY15 FY16 FY17 FY18E FY19F Revenues 2,218.54 2,561.81 2,573.84 2,759.68 2,963.38 EBITDA 547.62 612.79 700.78 819.31 944.07 Net Income 437.48 480.53 534.40 624.47 716.64 ROA (%) 15.65 16.08 16.92 18.36 19.79 ROE (%) 16.84 17.42 18.45 20.35 21.94 PER (x) 28.40 26.01 23.39 20.18 17.58 PBV (x) 4.78 4.53 4.32 4.11 3.86

Company Update Report | MNC Sekuritas Research Division

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Up to 1Q18, PT Sido Muncul Tbk (SIDO) successfully booked revenues of IDR620.84 billion, supported by the growth of herbal product segment, contributing 65.68% to total sales. This 1Q18 revenue reflects 22.50%/22.61% of MNCS/Consensus estimates. SIDO succeeded in reducing the cost of goods sold by 8.38% YoY, so that gross profit increased by 17.77% YoY from IDR259.73 billion to IDR305.89 billion, with a maintained margin of 49.27% (vs 43.04% in 1Q17). The efficiency of SIDO has an impact on net profit increase by 32.57% YoY in 1Q18, with a net profit margin maintained at 27.23% level (vs 21.13% in 1Q17), which representing 27.08%/30.78% of MNCS/Consensus estimate. SIDO’s success in maintaining its financial performance is reflected in healthy margins, low leverage and a ROE that grew by an average of 19% in the last 5 years.

1Q18: Higher than Expected Earnings stemmed from Cost Efficiency amid flat Revenue Growth


Exhibit 01. 1Q18 Financial Results

Source : Company, MNCS

IDR Billion 1Q17 4Q17 1Q18 QoQ YoY FY18E

Consensus FY18E MNCS

% Consensus

% MNCS

Sales 603 716 621 -13.33% 2.88% 2,745 2,760 22.61% 22.50%

COGS 344 393 315

Gross Profit 260 324 306 -5.54% 17.77% 1,223 1,282 25.02% 23.87%

Gross Profit Margin

43.04% 45.21% 49.27% 44.53% 46.44%

Operating Income 157 157 207 31.49% 31.69% 667 750 30.97% 27.55%

EBIT Margin 25.99% 21.93% 33.27% 24.30% 27.17%

PBT 171 167 221 32.58% 29.66% 694 798 31.88% 27.72%

Net Profit 128 153 169 10.21% 32.57% 549 624 30.78% 27.08%

Net Margin 21.13% 21.42% 27.23% 20.01% 22.63%

Based on the Ministry of Industry, Indonesia ranks 4th as a herbal producer in the world after China, India and Korea. This is certainly a potential development of our traditional medicine industry and organic-based cosmetics, which is a current trend in the market. SIDO, as one of the largest herbal medicine producers, has more than 250 products, with superior brands like Tolak Angin and Kuku Bima Energi. According to the rating agency TOP Brand Award in FY17, Tolak Angin occupied the first position with Top Brand Index by 58.90% of the cold medicine category and Kuku Bima was in second position, with Top Brand Index of 29.50% of the energized drink non-liquid category. Two of the SIDO's flagship products were awarded again by the Indonesian Customer Satisfaction Award (ICSA) in 2017, organized by Swa Sembada Magazine. It proves that SIDO has strong competitiveness in the herbal medicine industry.

Tolak Angin and Kuku Bima Stay as “Primadonna”

Company Update Report | MNC Sekuritas Research Division

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Exhibit 02. TOP Brand Award: Tolak Angin and Kuku Bima in FY17

Source: Company, Top Brand Award Indonesia

OBAT MASUK ANGIN MINUMAN PENAMBAH TENAGA NON CAIR

BRAND TBI TOP BRAND TBI TOP Tolak Angin Sido Muncul 58,90% TOP Extra Joss 55,20% TOP Antangin 37,60% TOP Kuku Bima Ener-G 29,50% TOP Bintang Toedjoe 1,90% Hemaviton Jreng 4,40%

In order to expand its market range, SIDO exported the Tolak Angin products to 12 countries and targeting a 5% revenues contribution this year (vs 2.5% in FY17). In 1Q18, SIDO plans to open a marketing office in the Philippines, with the aim of improving export performance. Promising business development, supported by good fundamentals has turned out to attract foreign investors. In early 2018, Affinity Equity Partners, a foreign private equity, is interested in a broader cooperation with the Company. We see this could have a positive impact on SIDO in developing domestic and export markets.

When Local Go International Attracts FDI Interest

SIDO distributed fat dividends, averaging 82.10% of its net profit over the last four years. This demonstrates the SIDO's well-established business position. The fat war chest resulted in SIDO being able to provide high dividends to attract investors to purchase its shares. Although the Dividend Payout Ratio offered is quite high, the Company still has the potential to grow, along with several expansions made in FY17 such as a liquid herbal medicine plant in Central Java.

Dividend Player: Average Dividend Payout Ratio 82% in FY14-FY17

Exhibit 03. Dividend Trend FY14-FY19F

Source: Company, Bloomberg, MNCS

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-

100

200

300

400

500

600

2014 2015 2016 2017 2018E 2019F

Dividend (IDR bn) DPR (%)

“Average Dividend Percentage 82% in FY14-FY17”

Company Update | MNC Sekuritas Research Division

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We recommend HOLD for SIDO at a TP: IDR810 which implies PE/PBV 19.48x/3.97x in FY18E and 16.98x/3.73x in FY19E. We believe a strong brand and the potential of entering the international market will become a positive catalyst for SIDO. On the other hand, rampant circulation of illegal herbal products that are free to circulate can threaten the well-being of the herbal medicine industry. SIDO is currently trading at +2 STD (average 3-year PE) with PE at 21.73x.

Recommendation HOLD with Target Price IDR810

According to the Association of Herbal and Traditional Medicines Indonesia (GP Jamu) rampant circulation of illegal herbal products that are free to circulate can threaten the well-being of the herbal medicine industry. The distribution of medicinal herbs and illegal herbs is observed to increase approximately 20%-30% per year. This is not proportional to the growth of herbal medicine requirement of only 10% per year.

The rise of Herbs and Illegal Herbs Potentially Seize Market Share

Exhibit 04. SIDO’s FY15-FY18 PE Band trades at +2 STD level (average 3 years PE)

Source : Bloomberg as of May 11, 2018

10

12

14

16

18

20

22

24

26

May

/15

Jul/1

5

Sep/

15

Nov/

15

Jan/

16

Mar

/16

May

/16

Jul/1

6

Sep/

16

Nov/

16

Jan/

17

Mar

/17

May

/17

Jul/1

7

Sep/

17

Nov/

17

Jan/

18

Mar

/18

May

/18

PE Ratio Mean STD -1 STD -2 STD +1 STD +2

21.58

19.61

17.65

15.69

13.72



Exhibit 05. Financial Projection

Source : Company, MNCS

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Income Statement Balance Sheet

Cash Flow Ratios

IDR Billion FY15 FY16 FY17 FY18E FY19F

Revenues 2,219 2,562 2,574 2,760 2,963

COGS 1,335 1,494 1,412 1,478 1,556

Gross Profit 883 1,068 1,162 1,282 1,407

Operating Expense 405 508 522 532 543

Selling Expenses 303 370 364 382 382

General and Administrative 102 138 172 150 161

Operating Profit 478 559 640 750 865

EBITDA 548 613 701 819 944

Interest Expense 0 0 0 - -

Interest Income 66 48 42 48 49

Other - - - - -

Profit Before Tax 560 629 682 798 914

Tax Expense 123 149 148 173 198

Net Income Before MI 437 481 534 624 716

Minority Interest 0 - - - -

Net Income 437 481 534 624 716

EPS (full amount) 30 32 36 42 48


CFO Total 434 454 654 749 758

Net Income 437 481 534 624 716

Depreciation 69 53 61 70 79

Change in Working Capital (37) (54) (68) 51 (42)

Change in others (36) (26) 127 4 5

CFI Total

(198)

(158)

(396)

(270)

(297)

Change in ST Investment - - - - -

Change in LT Investment - - - - -

Capex (240) (143) (224) (247) (272)

Change in Others 42 (15) (172) (23) (25)

CFF Total

(360)

(355)

(347)

(448)

(514) Net Change in Debt - - - - -

Equity financing - 13 0 - -

Dividend payment (360) (369) (387) (452) (518)

Others 0 0 40 4 4

Net Cash Increase (228) (25) (90) 31 (53)

Closing Balance 1,027 1,002 903 933 880

Ratio FY15 FY16 FY17 FY18E FY19F

Revenue Growth (%) 0.94 15.47 0.47 7.22 7.38

Operating Profit Growth (%) 9.61 16.93 14.44 17.11 15.32

Net Profit Growth (%) 4.78 9.84 11.21 16.85 14.61

Current Ratio (%) 92.77 83.18 78.12 65.28 60.86

Quick Ratio (%) 740.29 634.88 639.96 528.23 482.92

Receiveable Days 55.21 52.32 61.19 52.97 52.97

Inventory Days 72.44 77.46 69.26 70.63 72.79

Payable Days 40.39 43.45 32.29 40.22 41.07

Debt to Equity (x) 0.08 0.08 0.09 0.10 0.10

Debt to EBITDA (x) 0.36 0.37 0.37 0.38 0.35

Gross Profit Margin (%) 39.82 41.68 45.15 46.44 47.49

Operating Profit Margin (%) 21.57 21.84 24.88 27.17 29.18

EBITDA Margin (%) 24.68 23.92 27.23 29.69 31.86

Net Profit Margin (%) 19.72 18.76 20.76 22.63 24.15

ROA (%) 15.65 16.08 16.92 18.48 19.89

ROE (%) 16.84 17.42 18.45 20.35 21.92


Current Assets 1,707 1,794 1,629 1,649 1,651

Cash and Cash Equivalents 1,027 1,002 903 933 880

Trade Receivable 336 367 432 400 430

Inventories 265 317 268 286 310

Others current Assets 80 108 27 29 31

Non-Current Assets 1,089 1,193 1,529 1,730 1,948

Fix Asset - net 962 1,051 1,215 1,393 1,586

Other Non-Current Assets 127 142 314 337 362

TOTAL ASSETS 2,796 2,988 3,158 3,378 3,599

Current Liabilities 184 216 209 253 271

Account Payable 148 178 125 163 175

Short Term Debt - - - - -

Other current liabilities 36 38 84 90 96

Non-Current Liabilities 14 14 54 58 62

Long-term Liabilities - Net - - - - -

Other Non-Current Liabilities 14 14 54 58 62

TOTAL EQUITY 2,598 2,758 2,896 3,068 3,266

TOTAL LIABILITIES & EQUITY 2,796 2,988 3,158 3,378 3,599

Disclaimer This research report has been issued by PT MNC Sekuritas, It may not be reproduced or further distributed or published, in whole or in part, for any purpose. PT MNC Sekuritas has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; PT MNC Sekuritas makes no guarantee, representation or warranty and accepts no responsibility to liability as to its accuracy or completeness. Expression of opinion herein are those of the research department only and are subject to change without notice. This document is not and should not be construed as an offer or the solicitation of an offer to purchase or subscribe or sell any investment. PT MNC Sekuritas and its affiliates and/or their offices, director and employees may own or have positions in any investment mentioned herein or any investment related thereto and may from time to time add to or dispose of any such investment. PT MNC Sekuritas and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discusses herein (or investment related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies.

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MNC SEKURITAS RESEARCH TEAM Edwin J. Sebayang Head of Retail Research, Technical, Auto, Mining [email protected] (021) 2980 3111 ext. 52233

I Made Adi Saputra Head of Fixed Income Research [email protected] (021) 2980 3111 ext. 52117

Victoria Venny Telco, Toll Road, Logistics, Consumer, Poultry [email protected] (021) 2980 3111 ext. 52236

Rr. Nurulita Harwaningrum Banking, Auto, Plantation [email protected] (021) 2980 3111 ext. 52237

Tomy Zulfikar Research Analyst [email protected] (021) 2980 3111 ext. 52316

Krestanti Nugrahane Widhi Research Associate, Plantation, Consumer [email protected] (021) 2980 3111 ext. 52166

Thendra Crisnanda Head of Institutional Research, Strategy [email protected] (021) 2980 3111 ext. 52162

Gilang Anindito Property, Construction, Mining, Media [email protected] (021) 2980 3111 ext. 52235

Rheza Dewangga Nugraha Junior Analyst of Fixed Income [email protected] (021) 2980 3111 ext. 52294

MNC Research Investment Ratings Guidance BUY : Share price may exceed 10% over the next 12 months

HOLD : Share price may fall within the range of +/- 10% of the next 12 months SELL : Share price may fall by more than 10% over the next 12 months

Not Rated : Stock is not within regular research coverage

PT MNC SEKURITAS MNC Financial Center Lt. 14 – 16

Jl. Kebon Sirih No. 21 - 27, Jakarta Pusat 10340 Telp : (021) 2980 3111 Fax : (021) 3983 6899 Call Center : 1500 899

MNC SEKURITAS EQUITY SALES TEAM

T. Heldy Arifien Head of High Networth [email protected] (021) 2980 3111 ext. 52310

Okhy Ibrahim Senior Equity Institutional Sales [email protected] (021) 2980 3111 ext. 52180

Nesya Kharismawati Senior Equity Institutional Sales [email protected] (021) 2980 3111 ext. 52182

Harun Nurrosyid Senior Equity Institutional Sales [email protected] (021) 2980 3111 ext. 52187

Gilang Ramadhan Senior Equity Institutional Sales [email protected] (021) 2980 3111 ext. 52178

Iman Hadimulya, ST Senior Equity Institutional Sales [email protected] (021) 2980 3111 ext. 52174

Agus Eko Santoso Senior Equity Institutional Sales [email protected] (021) 2980 3111 ext. 52185

Muhamad Fauzan Saputra Junior Equity Sales [email protected] (021) 2980 3111 ext. 52150

Paksi Jaladara Junior Equity Sales [email protected] (021) 2980 3111 ext. 52173

Muhamad Rudy Setiawan Research Associate,Construction [email protected] (021) 2980 3111 ext. 52317

Khazar Srikandi Research Associate [email protected] (021) 2980 3111 ext. 52313

Sukisnawati Puspitasari Research Associate, Cement, Mining [email protected] (021) 2980 3111 ext. 52307

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MNCS COMPANY UPDATE - mncsekuritas.id · Page 2 Company Update Report | MNC Sekuritas Research Division Please see important disclaimer at the back of this report Up to 1Q18, PT Sido