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Sunday, September 4, 2011

PT Indofood CBP Sukses Makmur Tbk

by Trimegah Securities

ICBP reported Rp990bn net profit during 1H11, rise 23.7% YoY. Revenue up 5.7% YoY to Rp9.4tr, but flat on QoQ basis, grew only 0.3%. Noodles and dairy contributions were down to 68% and 19.3% respectively. GPM showed 30bps improvement on 2Q11 due to price increased in 1Q11 and lower input cost. However, on YoY comparison, GPM was down 80bps to 25.7% since soft commodities started to climb on 2H10. Hence, EBIT only grew 7.8% although operational expenses were well maintained. Rp84.4bn improvement from net interest and lower tax rate from 26.4% to 24.2% made the bottom line margin reached 10.5%.

Dairy Division: Lower margin due to higher input cost

Dairy division reported Rp1.8tr sales, increased 4.5% YoY; driven by 2.5% volume growth. EBIT margin down deeper from 10% in 1Q11 to 9.4% in 1H11 due to higher input cost such as skimmed milk, sugar, and higher shipping cost. 3% price increased on Feb'11 could not overcome the rise of raw material cost. Hence, EBIT fell 20.8% to Rp171.1bn. Management announced that the new dairy factory will be finished in 2H12, a delay due to late construction. The new plant will double the dairy production capacity.

Food Seasonings, Snacks, and NSF: Show better performance

The other three divisions recorded positive growth in term of sales and volume. Food seasonings' sales and volume grew 48.9% and 15.2% respectively. Price increased led to 160bps higher EBIT margin YoY to 4.6%. Snack foods' sales and volume grew 16.1% and 17.1% respectively although there was 50bps margin contraction due to higher potato and cooking oil price. While NSF showed an outstanding performance with EBIT margin reached 25.3% in 2Q11 from 4.3% in 1Q11.

The improvement was mainly due to lower advertising and promotion spending.

Valuation and Recommendation:

ICBP is trading at 17x FY11 PE, not quite cheap in term of valuation couple with a slight disappointing performance. However, the company has the best proxy of consumption driven story which become the safe haven in the global turmoil market, buy on weakness for this stock. Consensus TP is at Rp6184/share, reflects 18.7x FY11 PE, and offer 10.4% upside.

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