KBLI 1Q17 results: Below
• KBLI logged IDR670bn of revenue in 1Q17, implying flattish growth at 0.8% YoY, and making up 20.6% of our estimates (*below*). Margins were similar to 1Q16, but lower compared to 4Q16. We believe the margins decline were largely due to the significant increase of raw material prices–copper and aluminium 1Q17 monthly average prices were 26% and 23% higher compared to 1Q16 prices, respectively . Fortunately, however, contribution of sales to PLN was still at 41% (vs. 28% in 1Q16 and 40% in 4Q16), which compensated for the negative effects of rising raw material prices
• KBLI also booked IDR64bn of net profit in 1Q17, implying slight YoY growth at 2.6%, and making up 17.7% of our estimates. Core profit, however, was IDR62bn in 1Q17, implying slight decline at -1.9% YoY, and making up 17.2% of our estimates (*below*). Note that KBLI booked a slight forex gain in 1Q17 (vs slight forex loss in 1Q16)
• Despite the soft 1Q17 results, we still expect margins to improve (assuming stable raw materials prices) from higher sales to PLN derived from aluminium capacity expansion, expected to complete by 4Q17
• We maintain our Neutral call on KBLI with TP of Rp740. Currently, KBLI trades at 7.1x 2017F P/E
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