Sunday, March 27, 2011

PT. Indofood Sukses Makmur Tbk (INDF)

by Samuel Securities

Excellent FY10 net profit
· INDF recorded 3% revenue growth and 42% net profit growth YoY in FY10. Revenue was recorded at Rp38.4 trillion while net income was recorded at Rp2.95 trillion.
· The company’s FY10 results are relatively in-line with our projection with the bottom line result slightly above our projection. Revenue represents 98.8% and net income represents 104% from our FY10 projection.

· Every division contributed positive top line growth except Bogasari division due to lower ASP in FY10. As a result, FY10 top line result had a relatively flat outcome with only 2.7% YoY growth. Meanwhile, operating and net margin grew to 18% and 8% respectively mainly due to lower raw material cost, increased sales across all divisions except Bogasari, lower interest expense as a result from debt repayment using ICBP IPO proceeds, and stronger Rupiah.
· The overall QoQ basis performance in 4Q10 was poor as revenue and net profit dropped by 1% and 16% respectively. INDF’s sales in 3Q10 were exceptionally high due to the Muslim festive season and Eid ul-Fitr holiday.
· However, Agribusiness had a strong contribution in 4Q10 thanks to higher price of CPO and rubber which overshadowed the lower sales volume. These also brought the division’s profitability margin to surge to 16.7% vs. 14.7% in FY09.
· On the other hand, Bogasari division had become the laggard with its negative sales growth both YoY and QoQ due to lower flour price and inventory price lag as the company implied FIFO method.

Action & Recommendation:
· Currently, INDF is trading at a relatively cheap valuation at 14.4x PE’11F compared to the regional peers of 28.6x PE’11F. We maintain our TP of Rp6,000 reflecting 17.4x PE’11F supported by a strong leverage position after IPO of ICBP. BUY

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