Company Report | May 31, 2018
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.
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
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.
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.
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
.
Source: Bloomberg, NHKS research
Company
Market Cap
(USD mn)
Total Asset
(USD mn)
Net Profit
Growth
Net Profit
Margin
ROE
P/E
P/BV
Dividend
Yield
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%
India
ITC Ltd
48,770
8,625
10.1%
24.3%
23.1%
30.7x
6.8x
1.8%
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%
Malaysia
British American Tobacco Bhd
1,936
257
-31.7%
16.4%
99.0%
15.4x
19.8x
9.4%
Japan
Japan Tobacco Inc
55,837
46,380
-6.9%
18.3%
15.0%
13.6x
1.9x
4.7%
South Korea
KT&G Corp
12,635
9,346
-5.4%
24.9%
15.7%
10.7x
1.6x
4.1%
Sri Lanka
Source: Company, NHKS Research
HMSP Quarterly Net Profit |
2016 - 2018
Performance Highlights
HMSP Quarterly Sales by Volume |
2016 - 2018
Source: Company, NHKS Research
HMSP Quarterly Sales |
2016 - 2018
Source: Company, NHKS Research
Source: Company, NHKS Research
Machine-made Clove Cigarettes Sales Growth |
2016 -
Multiple Valuation
Forward P/E band |
Last 3 Years
Source: NHKS research
Dynamic Forward P/E
band
| Last 3 Years
Source: NHKS research
Rating and target price update
Source: NHKS research, Bloomberg
Target Price Revision
Closing and Target Price
Source: NHKS research
Analyst Coverage Rating
Source: Bloomberg
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%
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%
Summary of Financials
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
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% 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 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)
Sprea d (FROE-COE) (%) 28.4% 25.7% 25.4% 26.6%
