Sido Muncul
SIDO IJ / SIDO.JK
Brewing for the global marketplace
International expansion to pep up the top line
Increasing competition in its herbal segment (1Q18: +1.5% YoY, 66% total
revenue) has impelled SIDO to expand its market to ex-Greater Jakarta,
looking at both domestic and international opportunities. Commanding a
~65% market share of liquid herbal products, SIDO sells 10
sachets/person/year of “Tolak Angin” in Greater Jakarta. Meanwhile,
consumption rates are significantly lower in eastern Indonesia and other areas
around the nation, at ~1 and ~3 sachets/person/year, respectively. Although
we think that SIDO may face resistance in introducing its herbal products in
Eastern Indonesia, as they go up against existing traditional remedies,
successful penetration of the area will provide additional potential revenues in
the future. On the international front, SIDO plans to export Tolak Angin to the
Philippines starting 2H18 and is re-registering its products for sale next year
in Nigeria, in hopes of compensating for slack domestic revenue and
increasing its export sales to 5%, from a currently 2%. What’s more, SIDO is
eyeing a potential larger market for “Tolak Linu,” whose sales have
contributed 8% to total herbal sales volume. However, the immediate results
remain to be seen, as current revenue growth is supported by a 1Q18 ASP
increase. Therefore, we forecast soft revenue growth, at 4.2% YoY in 2018F.
Factory upgrades to underpin stronger margins
COGS-wise, SIDO is benefiting from processing cost efficiencies from its
extraction facility, starting this year. SIDO herbal products are mostly
insulated from USD/IDR exchange rate uncertainties, as raw materials are all
sourced locally. Furthermore, SIDO has successfully acquired all patents for
its jamu formulas – valued at IDR34bn, and thus no longer needs to pay
royalties (1.5% of sales), boosting potential gross margin expansion to 49.3%
in 2018F (FY17: 45.1%). The new facility (currently in a trial run) will have
~100mn sachets/mo in additional capacity, a relief from current utilization
rate nearing 100% (~90mn sachets/mo). And thanks to technological
advances, in addition to improvements in processing output, SIDO will be able
to produce Tolak Angin and Tolak Linu simultaneously, yielding more output.
Recommend BUY with IDR1,000 TP
SIDO has a clean balance sheet, running zero debt. Having settled down with
new factory capacity, there are no further expansions in sight at this point;
however, SIDO does not rule out acquisitions of companies in health-based
consumer product fields. Also, we believe Affinity will offer professionalism to
the Company. We expect SIDO to continue maintaining ~80 % DPR.
Deserving +1sd PE at 23x, we recommend BUY rating with TP of IDR1,000.
Risks include stiffer competition and scarcity of raw materials.
Willy Suwanto
willy.suwanto@bcasekuritas.co.id
+6221 23587222 ext 178
Pandu Anugrah
pandu.anugrah@bcasekuritas.co.id
+6221 23587222 ext 168
Komentar
Posting Komentar