Monday, May 9, 2011

PT Indofood CBP Sukses Makmur Tbk

by Kresna Securities

1Q11 result was relatively inline with our expectation, accounted for 21.6% — 23.3% of our FY estimates from top to bottom line. Revenue grew by 8.6% YoY boosted by sales volume growth as well as price increase on Jan11 — Feb11. We believe stable soft commodity price, strengthening rupiah as well as declining fresh food item prices will support its performance in the upcoming quarters. However, we believe the current price has reflected the attractive outlook, attributable to the recent price rally. Consequently, we downgrade our recommendation from BUY to HOLD.

· Revenue grew by 8.6% YoY to Rp4.7tr. The performance in 1Q11 was boosted by volume growth in all divisions except Noodles, which slid by 0.7% YoY to 2.9bn packs. However, as the company increased its noodle price twice in August last year and January this year, Noodles division posted growth of 7.9% YoY to Rp3.4tr. The largest contributor to the revenue are still Noodles and Dairy division which accounted for 71.0% and 17.1% respectively, while the remaining 11.9% were contributed by the other three divisions.

· EBIT increased by 5.6% YoY to Rp614.8bn. EBIT margin on Noodles expanded by 0.6% to 14.5% due to price increases. We expect more margin expansion in the following quarter as commodity prices such as CPO and wheat start to stabilize. On the other hand, margin on Dairy and Nutrition & Special Foods (NSF) divisions fell to 10.0% and 4.3% respectively due to higher input cost. We expect margin expansion on Dairy division in the following quarters attributable to 3% price increase in Feb11.

· Net income jumped by 17.8% YoY. The company has recorded Rp433.5bn net income with lower effective tax rate of 25.6% as compared to 26.6% last year. Moreover, the company has recorded net interest income this year as compared to net interest expense recorded last year.

· Capex to accelerate in the forthcoming quarters. The company has spent just below 5% of its capex this year, equivalent to only around Rp86.5bn. Capex spending will accelerate in the following quarters with the construction of dairy production facility starting on early Apr11.

· 1Q11 was inline with our expectation. ICBP revenue and net income of Rp4.7tr and Rp433.5bn in 1Q11 were inline with our expectation, both accounted for about 23% of our FY estimate.

· Maintain our forecast for 2011. Although noodle sales declined by 0.7% to 2.9bn packs, we maintain our forecast on sales volume to reach 12.0bn packs in 2011. Overall, we expect revenue to grow by 12.9% YoY to Rp20.3tr this year with higher ASP and higher volume growth. In the mean time, net income will rise by 9.1% YoY to Rp1.9tr.

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