Monday, April 25, 2011

PT. Indofood Sukses Makmur Tbk (INDF) - Saved by Efficiency

by E-Trading Securities
• INDF financial performance in 2010 (FY10A) was relatively good compared to previous year. In 2010, net sales increased 2.7%, resulting 19.4% gross profit growth. This is mainly caused by lower raw material cost.
Despite increasing of sales which is below our estimation, but net income exceeded than we expected.

• Inflation rate (6.96% YoY in 2010 and 2.78% YoY in 2009) has not fully affected to INDF’s revenue.
• Efficiency in 2010 supported by strengthening of IDR from USD/IDR 9,400 (in 2009) to closing at USD/IDR 8,991 (in 2010).

• Strengthening of CPO price from US$ 682/MT (in 2009) to US$ 903/MT (in 2010) also contributed to improvement INDF FY10A.

• We upgrade our target price to IDR 5,500 and recommend to HOLD INDF. The price reflect to 14x PE11F and 13x PE12F.

• Our view toward INDF future performance can be seen from INDF’s cost efficiency strategy, and strengthening of IDR. Strengthening of CPO price also contributes to future performance through its plantation division (agribusiness group), ex: LSIP, PT Salim Invomas, etc.

• IPO plan of PT Salim Invomas (a subsidiary of INDF) potentially bring the value of INDF further up. Unfortunately, INDF’s management still not able to disclose this information.

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