Please consider the rating criteria & important disclaimer
HMSP’s sales increased by 8.4% from IDR24 trillion in the 2Q17 to IDR26
trillion in the 2Q18. The growth in sales was backed by
machine
-
made
clove cigarettes (SKM) segment posted the growth of 14.5%
in sales from
IDR15.9 trillion in the 2Q17 to IDR18.3 trillion in the 2Q18. On the other
hand, white cigarettes (SPM) posted the decline of 16% in sales from
IDR3.2 trillion in the 2Q17 to IDR2.7 trillion in the 2Q18 whittled away
HMSP’s sales. The paradox of incline in sales by SKM segment vs. decline in
sales by SPM segment aligned with
the Indonesian smokers’ preference for
SKM
-
typed cigarettes.
Growth of 12% in 2Q18’s Net Profit
HMSP’s net profit grew by 12% from IDR2.75 trillion in the 2Q17 to IDR3.0
trillion in the 2Q18. However, on the semester basis, its net profit only
nudged up 1% from IDR6.04 trillion in the 1H17 to IDR6.1 trillion in the
1H18. The light growth was attributable to
the decrease in EBITDA margin
from 17.2% in the 1H17 to 16.4% in the 1H18
. We estimate that its
revenue exclude excise tax was constrained by
the hike in the excise tax on
cigarettes topping inflation
.
We use an estimate of forward P/E of 35.2x (the 3
-
year average) to obtain
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
38.3%, then ITC Ltd in India has the second
-
highest ROE of 22.8%. Backed by vastly
expanded markets shares and better cost efficiency, HMSP’s net profit likely nudges up
5.9% in 2018.
HMSP high P/E valuation of 32.9x 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
29,638
3,175
5.9%
12.7%
38.3%
32.9x
12.6x
2.8x
GGRM
9,270
4,913
18.1%
9.3%
20.9%
16.8x
3.4x
3.6%
India
ITC Ltd
53,750
9,869
9.5%
26.1%
22.8%
33.8x
7.3x
1.6%
Godfrey Phillips India Ltd
638
379
15.9%
6.9%
9.2%
28.6x
2.5x
0.9%
Malaysia
British American Tobacco Bhd
2,312
257
-
43.3%
16.4%
110.9%
22.1x
25.5x
4.6%
Japan
Japan Tobacco Inc
52,691
46,380
-
4.3%
18.3%
14.5%
13.7x
2.0x
5.0%
South Korea
KT&G Corp
12,268
9,346
0.0%
24.9%
15.8%
10.7x
1.6x
4.0%
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
-
2018
Source: Company, NHKS Research
Hand
-
rolled Clove Cigarettes Sales Growth |
2016
-
2018
Source: Company, NHKS Research
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
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%
09/04/2018
Hold
4,300 (Dec 2018)
3,790
4,098
+13.5%
+4.9%
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 39.4% 38.7% 40.4% 41.6%
Sales 95,467 99,091 105,413 112,742 Ca s h Di vi dend (IDR bn) 10,352 12,527 12,481 13,213
EBIT Margin 16.8% 16.2% 16.1% 16.0% Equi ty Ra ti o 80.4% 79.1% 80.7% 80.3%
Depreci a ti on 724 598 591 625 Debt Ra ti o 0.2% 0.3% 0.3% 0.3%
EBITDA 16,745 16,696 17,525 18,710 Fi na nci a l Levera ge 124.4% 126.5% 123.9% 124.6%
EBITDA Margin 17.5% 16.8% 16.6% 16.6% Current Ra ti o 523.4% 527.2% 586.5% 563.2%
