Hanjaya Mandala Sampoerna Bloomberg: HMSP.IJ Reuters: HMSP.JK

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Company Update

Hanjaya Mandala

Sampoerna

Bloomberg: HMSP.IJ | Reuters: HMSP.JK

Samuel Research 28 April 2017

Akhmad Nurcahyadi, CSA

+62 21 2854 8144

Deserve premium valuation

Tekanan industri rokok yang terus berlanjut tidak memberikan dampak negative pada pertumbuhan pendapatan dan laba HMSP di 1Q17. Pangsa pasar juga masih terjaga signifikan di semua kategori rokok (SPM, SKT dan SKM). Nilai premium saham HMSP menjadi sebuah hal yang wajar, mengingat kekuatan daya saing perusahaan di industri. Tetap BUY untuk HMSP dengan 12M DCF TP Rp4,390 (39.5xP/E17E, 13.5xPBV17E).

Kinerja 1Q17 sejalan dengan proyeksi. Pendapatan tetap bertumbuh meskipun tipis +3%YoY, dengan kenaikan laba sebesar +5.5%YoY. EPS yang dilaporkan sebesar Rp28, sejalan dengan ekspektasi konsensus sebesar Rp28.6 atau sedikit lebih tinggi dari 1Q17E SSI sebesar Rp27.2. Tahun ini, potensi terjaganya pertumbuhan laba bersih masih akan didorong oleh kenaikan ASP sebesar Rp1,005 vs Rp904.7 di 1Q16.

Volume penjualan yang tetap melemah. Sejak dua tahun lalu, kami telah melihat potensi pelemahan volume penjualan yang didorong oleh konsistensi kenaikan cukai dan kontinuitas kampanye anti rokok untuk menekan angka perokok nasional. Di 1Q17 volume penjualan industri rokok melemah sebesar -5.6%YoY menjadi 71miliar batang vs 75.2miliar batang di 1Q16. Sedangkan untuk HMSP sendiri volume penjualan mengalami pelemahan -6.9% menjadi 23.4miliar batang dari 25.1miliar batang.

Dominasi yang berlanjut. HMSP masih mendominasi persaingan industri hingga 1Q17 di semua segmen. SKT dan SKM masing-masing tercatat sebesar 37.7% dan 29.7%. Di sisi lain, meskipun tercatat turun untuk SPM, namun masih menguasai 76.5% dari pasar rokok putih. Untuk SKM kadar tar tinggi, HMSP membukukan kenaikan pangsa pasar yang sangat signifikan dari 6.9% di FY15, menjadi 9.8% di FY16 dan kembali naik menjadi 10.7% di 1Q17, sebagai akibat penerimaan pasar terhadap produk U Bold dan

Marlboro Filter Black.

Maintain (BUY). Tahun ini, tekanan volume panjualan kami perkirakan masih akan berlanjut, namun berpotensi masih tertutupi oleh kenaikan ASP.

Adapun resiko investasi antara lain: (1) kontinuitas kenaikan cukai diatas angka inflasi tahunan (2) penerapan PPN pada seluruh rantai distribusi (3) kontinuitas aktifnya kampanye menekan angka perokok.

Target Price Rp 4,390 Last Price Rp 3,850 Potential Upside 14.0% JCI Index 5,706 Share isued (bn) 116.32 Market Cap. (Rp tn) 447.82 52-Weeks High/Low 4,250 / 3,560

Avg Daily Vol (m n) 21.68

Free Float 7.5%

Nom inal Value Rp 4

Book value/share ‘16 Rp 306

Relative to JCI Chart

Com pany Background

Shareholder Structure

Philip Morris Indonesia 92.5%

Vontobel Holding 0.4%

Others 7.1%

BUY (Maintain)

PT Hanjaya Mandala Sampoerna Tbk memproduksi hand rolled (SKT) and machine-rolled clove-blended cigarettes (SKM). Distribusi produk dilakukan di dalam maupun luar negeri. Perusahaan memiliki pangsa produk SKM dan SKT yang tinggi.

80 85 90 95 100 105 110

Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

JCI HMSP

Forecast and Valuation (at closing price Rp3,860 per share)

Y/E Dec (Rpbn) 15E 16E 17E 18E

Sales 89,069 95,467 103,021 107,568 EBITDA 14,396 16,795 17,729 18,289 Net Profit 10,363 12,762 12,933 13,382 EPS (Rp/saham) 89 110 111 115 DPS (Rp) 2,745 66 73 81 Dividend Yield (%) 2.8 1.7 1.8 2.1

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Hanjaya mandala

Sampoerna

HMSP:IJ |HMSP.JK

Figure 1. HMSP Quarterly result - 1Q17

Source: Company, SSI research

Figure 2. HMSP P/E Band

Source: Company, SSI research

Rpbn 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 QoQ 1Q16 1Q17 YoY Sales 23,552 21,921 25,415 22,939 25,191 22,576 (10.4) 21,921 22,576 3.0 COGS (17,534) (16,268) (19,507) (17,320) (18,517) (16,769) (9.4) (16,268) (16,769) 3.1 Gross profit 6,017 5,653 5,908 5,619 6,674 5,807 (13.0) 5,653 5,807 2.7 SG&A (2,395) (1,731) (2,146) (1,905) (2,052) (1,645) (19.8) (1,731) (1,645) (5.0) Operating profit 3,622 3,922 3,762 3,714 4,622 4,162 (10.0) 3,922 4,162 6.1 Pre-tax profit 3,749 4,152 4,023 3,903 4,933 4,348 (11.9) 4,152 4,348 4.7 Income taxes (983) (1,033) (994) (970) (1,252) (1,057) (15.6) (1,033) (1,057) 2.3 Core Profit 2,696 2,955 2,758 2,754 3,464 3,120 (9.9) 2,955 3,120 5.6

Net income (loss) 2,767 3,119 3,029 2,933 3,681 3,291 (10.6) 3,119 3,291 5.5

EPS (Rp) 93 27 53 78 110 28 (74.2) 27 28 5.5 0 Margin Gross margin 25.6 25.8 23.2 24.5 26.5 25.7 (0.8) 25.8 25.7 (0.1) Operating margin 15.4 17.9 14.8 16.2 18.3 18.4 0.1 17.9 18.4 0.5 Net margin 11.7 14.2 11.9 12.8 14.6 14.6 (0.0) 14.2 14.6 0.4 10 20 30 40 50

Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17

Average ST dev +1 ST dev -1

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Hanjaya mandala

Sampoerna

Figure 3. Industry and HMSP sales volume - 1Q17

Indonesia and PMI sales volume

Total industry (bn sticks) 75.2 83.6 72.3 80.5 71.0 -11.8% -5.6% PMI sales volume (bn sticks) 25.1 28.6 25.1 26.7 23.4 -12.5% -6.9% PMI cigarette sales volume to total industry (bn sticks) 35.2% Sampoerna A 10.8 11.9 10.4 11.3 9.9 -12.4% -8.2% Dji Sam Soe 5.0 5.5 4.8 5.2 4.5 -13.2% -9.9% U Mild 3.4 3.7 3.1 3.1 3.6 13.1% 4.9% Others 6.1 7.5 6.8 7.2 5.5 -22.7% -9.1% Total 25.2 28.6 25.1 26.7 23.4 -12.3% -7.0%

Market share (%)

Sampoerna A 14.3% 14.2% 14.4% 14.0% 13.9% -0.1% -0.4%

Dji Sam Soe 6.6% 6.6% 6.6% 6.4% 6.3% -0.1% -0.3%

U Mild 4.5% 4.4% 4.3% 3.9% 5.0% 1.1% 0.5%

Others 8.1% 9.0% 9.4% 8.9% 7.8% -1.1% -0.3%

PMI - Total 33.5% 34.2% 34.7% 33.2% 33.0% -0.2% -0.5%

Industry segment sales volume (bn sticks)

Hand-Rolled Kretek - SKT 14.1 15.0 12.4 14.7 12.9 -11.8% -8.6% Machine-Made Kretek - SKM 56.6 63.3 55.5 61.3 54.2 -11.7% -4.2% Whites Cigarette - SPM 4.5 5.4 4.4 4.5 3.9 -13.4% -13.5% Total SKT, SKM and SPM 75.2 83.6 72.3 80.5 71.0 -11.8% -5.6% Industry segment M/S - - -Hand-Rolled Kretek - SKT 18.8% 17.9% 17.2% 18.2% 18.2% 0.0% -0.6% Machine-Made Kretek - SKM 75.2% 75.7% 76.7% 76.2% 76.3% 0.1% 1.1% Whites Cigarette - SPM 6.0% 6.4% 6.1% 5.6% 5.5% -0.1% -0.5% Total SKT, SKM and SPM 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0%

PMI share to industry segment (%)

Hand-Rolled Kretek - SKT 38.1% 38.2% 38.6% 37.8% 38.0% 0.2% -0.1%

Machine-Made Kretek - SKM 28.5% 29.2% 30.2% 29.0% 28.6% -0.4% 0.1%

Whites Cigarette - SPM 81.3% 81.1% 79.7% 76.3% 76.5% 0.2% -4.8%

PMI share sales volume to industry segment sales volume (bn sticks)

Hand-Rolled Kretek - SKT 5.4 5.7 4.8 5.5 4.9 -11.3% -8.8% Machine-Made Kretek - SKM 16.1 18.5 16.8 17.8 15.5 -12.9% -3.9% Whites Cigarette - SPM 3.7 4.3 3.5 3.4 3.0 -13.1% -18.6%

3Q16 1Q17

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Hanjaya mandala

Sampoerna

Key financial figures

Yr-end Dec (Rp bn) 15A 16A 17E 18E Yr-end Dec (Rp bn) 15A 16A 17E 18E Revenue 89,069 95,467 103,021 107,568 Net Income 10,363 12,762 12,933 13,382 COGS (67,305) (71,612) (77,325) (80,904) Dep. & Amort. 440 616 687 748 Gross profit 21,764 23,855 25,697 26,665 Chg Working Cap 216 (2,662) (2,341) (2,591) Gross margin (%) 24.4 25.0 24.9 24.8 Others (10,206) 3,360 (3,601) (3,523)

Operating profit 13,956 16,179 17,042 17,542 Operating CF 814 14,077 7,678 8,015

Operating margin (%) 15.7 16.9 16.5 16.3 Capex 971 1,209 1,388 1,177

EBITDA 14,396 16,795 17,729 18,289 Investing CF (4,537) (362) 1,234 1,129

EBITDA margin (%) 16.2 17.6 17.2 17.0 Change in Capital 20,414 (19) 30 - Other Income (Expenses) (23) 832 301 408 Others (15,037) (10,358) (8,302) (9,325) Pre-tax profit 13,933 17,011 17,343 17,949 Financing CF 5,377 (10,377) (8,272) (9,325)

Income tax - net (3,569) (4,249) (4,410) (4,568) Net Cash Flow 1,653 3,337 639 (180)

Net profit 10,363 12,762 12,933 13,382 Cash Beginning 65 1,719 5,056 5,696 Net profit margin (%) 11.6 13.4 12.6 12.4 Cash Ending 1,718 5,056 5,696 5,515

11,876

-6.94% -100.00%

Yr-end Dec (Rp bn) 15A 16A 17E 18E Yr-end Dec 15A 16A 17E 18E

Cash & ST Investment 1,719 5,056 5,696 5,515 ROE 32.4 37.3 34.3 32.4

Receivables 4,727 4,996 5,392 5,737 ROA 27.3 30.0 27.7 26.4

Inventories 19,072 19,442 21,765 24,985 Revenue Growth (%) 10.4 7.2 7.9 4.4

Others 4,290 4,153 4,115 4,296 EBITDA (%) 1.8 16.7 5.6 3.2

Total Current Assets 29,807 33,647 36,967 40,533 EPS Growth (%) 1.8 23.1 1.3 3.5

Net fixed assets 6,887 7,481 8,182 8,611 Interest coverage (x) 100.8 724.7 208.9 189.6

Other assets 1,317 1,380 1,535 1,583 Debt to Equity (%) 0.0 0.0 0.0 0.0

Total Assets 38,011 42,508 46,684 50,727 Net Gearing (%) -0.1 -0.1 -0.1 -0.1

Payables 3,605 5,504 5,940 6,202 ST. debt & curr. Mat - - -

-Other current liabilities 934 924 997 1,041 Yr-end Dec 15A 16A 17E 18E

LT. debt 41 66 71 74 GDP growth (%) 4.7 5.1 5.2 5.4 Other long term liabilities 1,415 1,839 1,985 2,072 USD/IDR (average) 13,500 13,253 13,200 12,800

Total Liabilities 5,995 8,333 8,993 9,390 Vol Sales (bn stick) 109.8 105.5 102.5 97.4

Total Equity 32,016 34,175 37,691 41,337 ASP (Rp) 810.9 904.7 1,005.4 1,103.9

Profit and Loss Statement Cash Flow

Profit and Loss Statement Key Ratios

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Research Team

Andy Ferdinand, CFA Head Of Equity Research, Strategy,

Banking, Consumer [email protected] +6221 2854 8148

Rangga Cipta Economist [email protected] +6221 2854 8396

Muhamad Makky Dandytra, CFTe Technical Analyst [email protected] +6221 2854 8382

Akhmad Nurcahyadi, CSA Auto, Aviation, Cigarette, Construction

Healthcare, Heavy Equipment, Property [email protected] +6221 2854 8144 Arandi Ariantara Cement, Telecommunication, Utility [email protected] +6221 2854 8392

Marlene Tanumihardja Poultry, Retail, Small Caps [email protected] +6221 2854 8387

Sharlita Lutfiah Malik Mining, Plantation [email protected] +6221 2854 8339

Nadya Swastika Research Associate [email protected] +6221 2854 8338

Private Wealth Management

Evelyn Satyono Head of PWM / Institutional Sales [email protected] +6221 2854 8380 Muhamad Alfatih CSA, CTA, CFTe Senior Technical Portfolio Advisor [email protected] +6221 2854 8129

Ronny Ardianto Institutional Equity Sales [email protected] +6221 2854 8399

Clarice Wijana Institutional Equity Sales [email protected] +6221 2854 8395

Fachruly Fiater Institutional Equity Sales [email protected] +6221 2854 8325

Equity Sales Team

Kelvin Long Head of Equities [email protected] +6221 2854 8150

Yulianah Institutional Equity Sales [email protected] +6221 2854 8146

Lucia Irawati Retail Equity Sales [email protected] +6221 2854 8173

Online Trading Sales Team

Nugroho Nuswantoro Head of Marketing Online Trading [email protected] +6221 2854 8372

Wahyu Widodo Marketing [email protected] +6221 2854 8371