Strong 3Q18 earnings, 9M18 results in-line with our expectation
HMSP recorded revenue growth of 9.1% QoQ in 3Q18 supported by higher volume and
ASPs for its entire cigarette segments. Coupled with better profitability, this brought 3Q18
net income up by 16.1% QoQ at Rp3.57 tn. The company raised ASP in 3Q18 by around 2- 3% to balance off the excise tax hike and raw material prices. Meanwhile, HMSP net
profit was 3.8% YoY higher, reaching Rp9.69 tn, in-line with our expectations (73.3% of our
FY18F). HMSP booked 9M18 revenue growth of 7.2% YoY to Rp77.53 tn, which came at
73% of our FY18F and consensus. As COGS and Opex increased at a faster rate of 8.3%
and 7.9% YoY, these resulted gross and operating profit slightly increased by 4.1% and
2.2% YoY at Rp18.3 tn and Rp12.1tn, respectively. GPM and OPM contracted by 70-80bps to
23.6% and 15.6% in 9M18, respectively. The main revenue contributor, machine-made
cigarettes experienced double digit sales growth of 12.5% YoY. While, hand rolled
cigarettes booked 3.3%YoY sales growth. Meanwhile, export segment and white cigarettes
suffers double-digit decline by -22.9% YoY and -13.5% YoY.
SKM booked solid performance
HMSP sales volume strengthened by +6.2% QoQ to 26.5 bn sticks in 3Q18 after recorded
+8.6% QoQ volume growths in 2Q18. However, HMSP’s market share dropped slightly by - 0.1%YoY or -0.2% QoQ but to around 33%, due to the lower market share on SKM (23.4% in
3Q18 from 23.9% in 2Q18). We noticed, Sampoerna A and U Mild reported volume
decreased in 3Q18 due to the continuous rising of prices (2%-2.5%). On the other hand,
Marlboro Filter Black 20s and Dji Sam Soe Magnum Mild 16s constantly record a growing
volume. Stronger demand also enables HMSP to increase Magnum Mild price by 1.5% in
3Q18 after 5% hike in Q2; and another 3.7% QoQ for Marlboro Filter Black after similar
rate increased in Q2. Hence, we expect SKM division will be able to deliver better
performance in 2018F by +9.1% and +8.3% sales growth in 2019F despite the slowing
performance in Sampoerna A and U Mild.
SKT unexpectedly recorded significant sales growth
In 3Q18, SKT reported significant improvement in revenue by 3.3%YoY and 14.8% QoQ,
compared to flattish performance in last 1H18. Further, in 3Q18 backed by the strong
volume growth (+11%QoQ) to 5.2bn sticks; HMSP was able to increase the Sampoerna
Kretek 12s ASP by 0.5% vs 0.2% price increased in 2Q18. Phillip Morris Indonesia (PMI)
data shows stronger volume and ASP has broadly offset the higher production costs on
weaker Rupiah, higher tax and marketing expense.
Upgrade to BUY rating with higher TP of Rp4,500/share
As we rollover our valuation to 2019F, our DCF based TP increased to Rp 4,500/share
from the previous Rp 4,300. We expect HMSP is still able to raise its ASP and generate
higher net income going forward on stronger demand supported by election sentiment
next year. We upgrade our Hold rating to BUY for HMSP, since our new TP offers 15%
upside potential. HMSP currently trades at 2018-19F PER of 33.5-31.7x.
Stella Amelinda
+62 21 2557 4800 ext. 740
amelindastella@ciptadana.com
Komentar
Posting Komentar