Please consider the rating criteria & important disclaimer
trillion in 2017. The biggest contributor to the 2017 overall sales was
the
surge of 9.4% in sales from IDR12.4 trillion in 2016 into IDR13.6 trillion in
2017 accomplished by the agribusiness segment
. Meanwhile, the CBP and
flour segments respectively posted the growth of 4.2% and 3.5% in sales.
Performance of Flour Segment: 2018 Performance Bolster
We estimate that in 2018, the agribusiness segment’s sales likely nudges up
by 2.2% lower than the hike in 2017’s sales. The slight increment is
attributable to the likely stable CPO prices during 2018. Another to the
stable CPO prices,
the flour segment likely posting the incline of 7.9% in
the 2018 sales underlined by the upbeat global flour prices is also the
bolster for the 2018 growth.
Stable Earnings Margin
INDF likely succeeds in maintaining a stable gross margin at the average of
55% estimated to be maintainable in 2018. The CBP segment dominating
70% of the instant noodle markets in Indonesia is one of the bolsters for
stable earnings margin; thus, INDF finds no difficulties in control the selling
price.
Another to the CBP segment, the flour segment also sets the cost
plus selling prices resulting in the maintainable earnings margin
.
Target Price of IDR8,175
We use an estimate of forward P/E of 15.7x (the 3
-
year average) to obtain
ASEAN Food Companies
A Glance at INDF
Indofood (INDF) has transformed into a Total Food Solutions within the last two decades
with the operational activities covering all phases of the processed food production —
from raw materials processing into end products available in markets. Now, INDF has its
credibility of a leading company in each of its business categories. Its operational
activities gain benefits from economics scale and its robust business model consisting of
4 integrated strategic business categories (Group).
The consumer branded products (CBP) is supported by the strength of its products. The
CBP group produces a diverse range of consumer branded products, such as instant
noodles, dairy products, snacks, food seasonings, nutrition and special foods, and
beverages.
The Bogasari segment equipped with shipping and packaging business units has main
business activity is to produce wheat flour and pasta.
The agribusiness segment activities are researches and developments, seed breeding,
cultivating and processing oil palm, as well as, production and marketing cooking oil,
margarine, and shortening. This segment also cultivates and process rubber, sugar cane,
and other plantations.
The distribution segment has a main business activity to distribute most of consumer
products manufactured by Indofood, its subsidiaries, and the third parties, to markets.
Food Industry in ASEAN
INDF has the lowest P/E of 13.9x among its peers in ASEAN. Having a low P/E, it has a
high dividend yield of 3.4% — the basis for its popularity as the top pick for consumer
staples in ASEAN.
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
INDF
4,571
6,472
4.9%
5.9%
9.1%
13.9x
1.2x
3.4%
ICBP
7,197
2,327
14.4%
11.7%
20.2%
22.0x
4.2x
2.0%
Malaysia
NESTLE (MALAYSIA) BERHAD
9,092
630
1.4%
12.3%
100.3%
54.3x
54.8x
1.8%
PPB GROUP BERHAD
5,881
5,636
15.4%
28.0%
5.8%
18.8x
1.1x
1.3%
Thailand
Source: Company, NHKS Research
INDF Sales Trend |
FY2013
-
FY2018E
Source: Company, NHKS Research
Sales Contribution Trend |
2014
-
2017
Agribusiness Division Sales Trend |
2014
-
2017
Source: Company, NHKS Research
CBP Division Sales Trend |
2014
-
2017
Source: Company, NHKS Research
Performance Highlights
Flour Division Sales Trend |
2014
-
2017
Source: Company, NHKS Research
Distribution Division Sales Trend |
2014
-
2017
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
Target Price Revision
Date
Rating
Target Price
Last Price
Consensus
vs Last Price
vs Consensus
06/19/2017
Buy
10,275 (Dec 2017)
8,325
9,602
+23.4%
+7.0%
09/22/2017
Buy
10,250 (Dec 2018)
8,725
9,464
+17.5%
+8.3%
12/13/2017
Buy
9,825 (Dec 2018)
7,350
9,454
+33.7%
+3.9%
04/26/2018
Buy
8,175 (Dec 2018)
6,900
9,117
+18.5%
-
10.3%
Source: NHKS research, Bloomberg
Closing and Target Price
Source: NHKS research
Analyst Coverage Rating
Source: Bloomberg
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1.
Period: End of year target price
2.
Rating system based on a stock’s absolute return from the date of publication
Buy
: Greater than +15%
Summary of Financials
DISCLAIMER
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in IDR Bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 4.8% 4.9% 4.9% 4.9%
Sales 66,750 70,187 73,699 77,420 Ca s h Di vi dend IDR bn) 1,475 2,063 2,076 2,178
Growth (% y/y) 4.2% 5.1% 5.0% 5.0% Di vi dend Yi el d (%) 2.1% 3.1% 3.4% 3.6% COGS (47,322) (50,318) (52,820) (55,496) Pa yout Ra ti o (%) 49.7% 49.8% 49.8% 49.8%
Gross Profit 19,428 19,869 20,879 21,924 DER 51.0% 52.0% 52.0% 52.0%
Gross Margin 29.1% 28.3% 28.3% 28.3% Net Gea ri ng 44.4% 47.8% 56.0% 59.7% Opera ti ng Expens es (11,053) (11,475) (12,045) (12,654) LT Debt to Equi ty 27.1% 24.8% 25.3% 25.3%
EBIT 8,376 8,393 8,833 9,270 Ca pi ta l i za ti on Ra ti o 33.8% 34.2% 34.2% 34.2%
EBIT Margin 12.5% 12.0% 12.0% 12.0% Equi ty Ra ti o 53.5% 53.2% 53.6% 53.8% Depreci a ti on 2,239 2,135 2,767 3,098 Debt Ra ti o 27.3% 27.7% 27.9% 28.0%
EBITDA 10,614 10,528 11,600 12,368 Fi na nci a l Levera ge 211.0% 181.2% 183.6% 182.0%
