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Monday, May 2, 2011

Kalbe Farma - Weak 1Q11 top line growth

by Samuel Securities

 In 1Q11 KLBF recorded a relatively weak revenue growth at 7.5% YoY while net profit was reported to grow by 23.3% YoY.

 Comments:

 KLBF’s 1Q11 result was below market expectation as well as with our projection. Revenue accounted for 18.6% from our estimate while net income accounted for 19.4% from our estimate.

 Due to the divestment of the packaging business unit, revenue from Distribution & Packaging division went down by 5.8% YoY. Furthermore, the division has the highest contribution (30.4%) to total revenue, thus the overall consolidated revenue was dragged down even though other divisions reported higher growth.

 As for the other divisions, Nutritional division became the lead performer with 19.8% YoY growth followed by Consumer health division with 14.1% growth and Prescription Pharmaceuticals division at 11% YoY growth. Although sales of energy drinks are yet to be stable, Consumer health division managed to record higher sales than the previous period mostly supported by the strong sales of over-the-counter drugs as well as the new products launched.

 Meanwhile, KLBF has completed its Cikarang generic drugs facility, ready for production, and waiting for certification from the local FDA. We believe this new facility along with the new oncology drugs facility, which is currently under construction, will be able to compensate the loss of the packaging business unit.

 KLBF also proposed to increase their dividend payout from 25% to 50% from FY10 net profit or around Rp63/share with 1.8% yield. This proposal is subject to shareholders’ approval in the next Annual General Shareholder Meeting possibly held in May.

Action & Recommendation:

 We maintain our recommendation and TP of Rp3,375 as the current market value of the stock reflects 21x PE’11F, premium compared to JCI’s 15.2x PE’11F. HOLD

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