MNCS COMPANY UPDATE - mncsekuritas.id fileMaintain Its Market Share by Supporting National Team in...

MNCS COMPANY UPDATE

MNC Sekuritas Research Division May 07, 2018

Please see important disclaimer at the back of this report

Key Financial Highlight

1Q18 Performance: Healthy Financial Performance and Maintained Margin ICBP recorded a good performance with revenue in 1Q18 increasing by 4.47% YoY to IDR 9,88 trillion in 1Q18 and also maintained its operational performance by holding their operating margin at 17.36% (vs 16.03% in 1Q17). This condition is in line with our expectation, which represent 25.36% of the MNCS estimate. The growth of revenue supported by Noodles and Nutrition & Special foods segment with growth of 7.10% YoY and 20.46% YoY respectively with each contribution of 66.34% and 2.12% of total sales. EBITDA grew 10.57% YoY to IDR 1,87 trillion and net profit grew 11.10% YoY to IDR 1,12 trillion which each reflect to 29.67% and 29.09% of MNCS estimate. Maintain Its Market Share by Supporting National Team in Asian Games 2018 In 1Q18, Indomie brand still occupies the top six in instant noodle trade in Asia Pacific. Indomie's sales for the worldwide also showed a significant growth of 10.45% YoY on FY17 (vs -3.71% on FY16). Also, ICBP’s Indomie and Pop Mie can be found on the Indonesian Top Brand Index Number 1 in 1Q18 as the most top brand. In the term to build more brand awareness for both domestic and overseas, ICBP together with PT Indofood Sukses Makmur Tbk (INDF), initiated “Satukan Tekad dan Semangat Indonesia” movement by becoming the official partner of Asian Games 2018 which will take place on 18 August 2018 until 2 September 2018 in Jakarta and Palembang. Fierce Competition and Raw Material Price to be Considered The competition map in the instant noodle segment is getting tighter amidst the stagnant economy. Other things to note are fluctuations in the USD/IDR rate that could potentially increase costs in raw material purchases as well as fluctuations in commodity for ICBP’s main ingredients. BUY Recommendation with TP: IDR 9,100 We recommend BUY for ICBP with TP: IDR 9,100, which implies PE/PBV of 25.45x/4.91x on FY18E and PE/PBV of 22.81x/4.44x on FY19F. We believe that high demand for noodles and as the biggest holder of brand share will maintain ICBP’s growth in the future. Also, the changing of Indonesian society’s consumption pattern into healthy food will bring a new opportunity for ICBP. ICBP is currently trading at a level of –1 STD (average 3-years PE) with PE of 25.53x.

PT Indofood CBP Sukses Makmur Tbk (ICBP ) Food and Beverages Sector

The Champion still Leading

BUY

Stock Data

Major Shareholders

Research Analyst

Victoria Venny N.S. [email protected] (021) 2980 3111 ext. 52236 Source: Company, MNCS (as of May 07, 2018)

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

In Billion IDR FY15 FY16 FY17 FY18E FY19F Revenues 31,741 34,375 35,607 38,968 42,944 EBITDA 4,447 5,730 5,713 6,380 7,170 Net Income 3,001 3,600 3,797 4,170 4,652 ROA 11.30% 12.46% 12.01% 11.95% 12.21% ROE 19.42% 20.50% 19.41% 19.29% 19.45% PER (x) 16.66 27.78 26.34 23.98 21.50 PBV (x) 3.05 2.70 2.46 2.22 2.00

Curent Price (IDR) :

52wk Range H-L (IDR)

:

Share Outstanding :

Free Float (%) :

Mkt Capitalization (IDR bn)

:

8,475

9,275-7,900

11,661 mn

19.47

98,834

PT Indofood Sukses Makmur Tbk

: 80.53%

Public : 19.47%

Target Price : 9,100

Company Update Report | MNC Sekuritas Research Division



ICBP recorded a good performance in 1Q18 supported by the growth of Noodles and Nutrition & Special foods segment with growth of 7.10% YoY and 20.46% YoY respectively with each contribution of 66.34% and 2.12% of total sales. In 9M17, Nutrition & Special foods division has launched new product named GoWell which is a nutritious yet easy-to-serve cereal milk as a practical breakfast with target market for children. Increasing the contribution of this division can be seen from the growth in sales of 1.96% in 4Q17 to 2.12% in 1Q18.

ICBP recorded an revenue increase by 4.47% YoY to IDR 9.88 trillion in 1Q18 and also maintained its operational performance and cost efficiency by holding their operating margin at 17.36% (vs 16.03% in 1Q17). EBITDA grew 10.57% YoY to IDR 1.87 trillion and net profit grew 11.10% YoY to IDR 1.12 trillion which each reflect to 29.67% and 29.09% of MNCS estimate. Meanwhile, EBITDA margin was at 18.97% with net profit margin maintained at 12.28% level in 1Q18.

Healthy Financial Performance and Maintained Margin at 1Q18 in The Line with Our Expectation

Exhibit 01. Revenue per Segments

Source : Company, MNCS

IDR Billion 1Q17 4Q17 1Q18 QoQ YoY

Noodles 6,000 5,740 6,423 11.90% 7.04%

Dairy 1,858 1,728 1,882 8.90% 1.31%

Food Seasonings 263 612 231 -62.26% -12.22%

Snack Foods 758 496 718 44.79% -5.23%

Nutrition & Special Foods 174 208 209 0.38% 20.46%

Beverages 405 357 417 16.89% 2.92%

Exhibit 02. 1Q18 Financial Results

Source: Company, Bloomberg, MNCS

IDR Billion 1Q17 4Q17 1Q18 QoQ YoY FY18E

Consensus FY18E MNCS

% Consensus

% MNCS

Sales 9,458 8,176 9,881 20.85% 4.47% 38,928 38,968 25.38% 25.36%

COGS 6,476 5,749 6,676 16.12% 3.09%

Gross Profit 2,982 2,427 3,205 32.06% 7.47% 12,094 11,845 26.50% 27.06%

Gross Profit Margin

31.53% 29.68% 32.44%

Operating Income

1,516 878 1,715 95.41% 13.13% 5,618 5,601 30.53% 30.63%

EBIT Margin 16.03% 10.74% 17.36%

EBITDA 1,681 1,052 1,893 79.97% 12.60% 6,583 6,380 28.75% 29.67%

EBITDA Margin

17.77% 12.86% 19.16%

PBT 1,535 964 1,664 72.59% 8.42% 5,658 5,790 29.41% 28.74%

Net Profit 1,092 755 1,213 60.68% 11.10% 4,167 4,170 29.11% 29.09%

Net Margin 11.54% 9.23% 12.28%


ICBP together with PT Indofood Sukses Makmur Tbk (INDF), initiated “Satukan Tekad dan Semangat Indonesia” movement by becoming the official partner of Asian Games 2018 which will take place on 18 August 2018 until 2 September 2018 in Jakarta and Palembang. In this case, ICBP markets three main products specifically Indomie, Pop Mie, and Indomilk with amusing packaging themed and display memorable mascots of Asian Games 2018, the product will be available in July 2018. It is also done by ICBP in order to support the national team that will compete and host the Asian Games.

Indonesia has a population of around 261 million people with the largest population of productive age around 67.77%. According to the Indonesian Health Minister’s Regulation Number 75 year 2013 about Nutritional Sufficiency Recommended For Indonesian Nation for the productive age with average number of a man for 64.50 grams/day and woman of 57.25 grams/day. According to BPS, the amount of protein consumption per capita is 62.20 grams/day increased by 9.76% YoY in FY17 (vs 2.83% YoY in FY16), which this condition is showing protein consumption for Indonesian productive age population still low and indicates support for people’s consumption changes patterns that tend to healthy foods. This could make an opportunity for ICBP to innovate and focus especially in Nutrition & Special foods division.



In 1Q18, Indomie brand still occupies the top six in instant noodle trade in Asia Pacific. Indomie's sales for the worldwide also showed a significant growth of 10.45% YoY on FY17 (vs -3.71% on FY16). We believe ICBP still has a high chance to enter the Asia Pacific market and even the international market. According to the World Instant Noodles Association (WINA) for Per Capita Consumption, Indonesia occupies the third largest position in the world with approximately 50.5 portions of the average World's Per Capita Consumption of 13.3 servings at 6M17. Indomie and Pop Mie excellent products as the most top brand in Top Brand Index Number 1 in 1Q18 result. Therefore, the high demand for noodles and the superior position of brand share makes a positive catalyst for ICBP.

Brand Champion: Noodles still maintained at The Top

Positive Strategy: Official Partner of Asian Games 2018 and Changing Pattern into Healthy Food

Exhibit 03. Top Brand Index Phase I in FY18 Food & Beverage Category

Source: Top Brand Awards

Indomie, 77.80%

Mi Sedaap, 10.20%

Sarimi, 4.40%

Supermi, 4.10% Others, 3.50%

Pop Mie, 40.50%

Mi Sedaap Cup, 15.20%

ABC, 14.10%

Others, 30.20%

Instant Noodles in Bag Packaging Instant Noodles in Cup Packaging




We recommended BUY for ICBP with TP:IDR 9,100 which implies 25.45x/4.91x on FY18E and PE/PBV of 22.81x/4.44x on FY19F. We believe that high demand for noodles and as the biggest holding of brand share will maintain ICBP’s growth in the future. Also, the changing of Indonesian society’s consumption pattern into healthy food will bring a new opportunity for ICBP. ICBP is currently trading at a level of –1 STD (average 3-years PE) with PE of 25.53x.

BUY Recommendation with Target Price IDR 9,100

The competition map in the instant noodle segment is getting tighter amidst the stagnant economy. Wings Food with the Mie Sedaap brand strives to enlarge its market share, followed by the Bakmi Mewah brand owned by Mayora Group has the potential to gain market share. The change of consumption pattern of people who focus more on healthy foods also become a matter of concern for ICBP to seek people’s change toward which healthy food. Other things to note are fluctuations in the USD/IDR rate that could potentially increase costs in raw material purchases as well as fluctuations in commodity prices such as wheat, sugar, and skim milk powder that are ICBP’s the main ingredients.

Risk to Watch Out: Fierce Competition, USD/IDR Rate, and Raw Material Price

Exhibit 06. ICBP’s PE Band at The Level –1 STD

Source: Bloomberg as of 7 May 2018

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

22.13

25.56

28.99

35.85

32.42

Exhibit 04. USD/IDR Fluctuation for The Last 3 Years


12,000

12,500

13,000

13,500

14,000

14,500

15,000

May

/15

Jul/

15

Sep/

15

No

v/15

Jan/

16

Mar

/16

May

/16

Jul/

16

Sep/

16

No

v/16

Jan/

17

Mar

/17

May

/17

Jul/

17

Sep/

17

No

v/17

Jan/

18

Mar

/18

May

/18

USD to IDR Average for The Last 3 Years

13,956

13,455

Exhibit 05. Wheat Price for The Last 3 Years

300

350

400

450

500

550

600

650

700

May

/15

Jul/

15

Sep/

15

Nov

/15

Jan/

16

Mar

/16

May

/16

Jul/

16

Sep/

16

Nov

/16

Jan/

17

Mar

/17

May

/17

Jul/

17

Sep/

17

Nov

/17

Jan/

18

Mar

/18

Wheat Price (USD) Average for The Last 3 Years

527.5

453.8



Exhibit 07. Financial Projections

Source: Company, MNCS (as of May 07, 2018)



Income Statement

IDR Billion FY15 FY16 FY17 FY18E FY19F IDR Billion FY15 FY16 FY17 FY18E FY19F

Revenue 31,741 34,375 35,607 38,968 42,944 Cash and cash equivalents 7,757 8,372 8,945 10,448 11,851

COGS 22,122 23,607 24,548 27,123 29,854 Trade Receivables 3,364 3,894 4,126 4,516 4,977

Gross Profit 9,619 10,768 11,059 11,845 13,090 Inventory 2,547 3,110 3,262 3,554 3,912

Operating Expenses 5,627 5,904 5,837 6,105 6,699 Other Current Assets 294 196 246 250 255

Selling Expense 4,172 4,179 4,013 4,451 4,887 Total Current Assets 13,962 15,571 16,579 18,769 20,994

General and Administrative 1,539 1,654 1,668 1,850 2,031 Fixed Assets-net 6,556 7,114 8,120 9,341 10,459

Operating Profit 3,898 4,765 5,037 5,601 6,288 Other Non-Current Assets 6,043 6,216 6,920 6,788 6,656

EBITDA 4,447 5,370 5,713 6,380 7,170 Total Non-Current Assets 12,599 13,331 15,040 16,129 17,115

Interest Expense (251) (175) (128) (129) (131) TOTAL ASSETS 26,561 28,902 31,620 34,898 38,110

Interest Income 426 403 324 318 373 Trade Payables 2,581 3,083 3,519 3,889 4,280

Other - - - - - Short-term Debt 873 563 1,149 1,161 1,178

Profit Before Tax 4,010 4,989 5,207 5,790 6,530 Other current liabilities 2,549 2,823 2,159 2,848 3,125

Tax Expense 1,086 1,358 1,663 1,482 1,658 Total Current Liabilities 6,002 6,470 6,828 7,897 8,583

Net Income Before MI 2,923 3,631 6,870 4,308 4,871 Long-term Debt 1,416 872 955 964 979

Minority Interest (78) 31 (253) 138 219 Other Long-term liabilities 2,755 3,059 3,513 3,518 3,515

Net Profit 3,001 3,600 3,797 4,170 4,652 Total Long-term Liabilities 4,171 3,931 4,468 4,482 4,494

Total Equity 16,387 18,501 20,324 22,519 25,032

EPS (full amount) 515 309 326 358 399 TOTAL LIABILITIES & EQUITY 26,561 28,902 31,620 34,898 38,110

Balance Sheet

Balance Sheet

IDR Billion FY15 FY16 FY17 FY18E FY19F Ratio FY15 FY16 FY17 FY18E FY19F

Net Income 3,001 3,600 3,797 4,170 4,652 Revenue Growth 5.72% 8.30% 3.58% 9.44% 10.20%

Depreciation 549 605 676 779 882 Operating Profit Growth 22.40% 22.24% 5.71% 11.20% 12.26%

Change in Working Capital 57 (365) (285) 371 (154) Net Income Growth 13.46% 19.98% 5.45% 9.83% 11.56%

Change in others - - - - -

CFO 3,607 3,841 4,187 5,320 5,380 Current Ratio(x) 2.33 2.41 2.43 2.38 2.45

Change in Intagibles 133 298 500 132 132 Quick Ratio(x) 1.85 1.90 1.91 1.89 1.96

Change in Investment (464) (513) (1,013) - - Receivables Days 38.68 41.35 42.30 42.69 41.98

Capex (1,295) (1,164) (1,682) (2,000) (2,000) Inventory Days 42.02 48.08 48.50 47.83 47.83

Change in other (14) 117 (241) - - Payable Days 42.58 47.67 52.33 53.23 53.70

CFI (1,639) (1,261) (2,435) (1,868) (1,868) Debt to Equity (x) 0.19 0.12 0.12 0.11 0.10

Short Term Debt (379) (269) 232 11 17 Debt to EBITDA (x) 0.65 0.38 0.41 0.37 0.34

Long Term Debt (158) (555) 80 15 12

Employee Benefit 122 263 564 - - Gross Profit Margin 30.30% 31.33% 31.06% 30.40% 30.48%

Dividend (1,493) (1,796) (1,796) (2,114) (2,358) Operating Profit Margin 12.28% 13.86% 14.15% 14.37% 14.64%

Other 295 393 (259) 138 219 EBITDA Margin 14.01% 15.62% 16.04% 16.37% 16.70%

CFF (1,613) (1,965) (1,178) (1,949) (2,109) Net Profit Margin 9.45% 10.47% 10.66% 10.70% 10.83%

Net Cash Increase 354 615 573 1,503 1,403 ROA 11.30% 12.46% 12.01% 11.95% 12.21%

Closing Balance 7,757 8,372 8,945 10,448 11,851 ROE 19.42% 20.50% 19.41% 19.29% 19.45%

Ratios



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

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.

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

M. 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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