Equity Research

Result note

Wednesday,24 March 2021

BUY Indofood Sukses Makmur(INDF IJ)

MAINTAIN Earnings lifted by margin expansion
Last price (IDR) 6,675 INDF reported 4Q20 net profits of IDR2.7tn, +96.6% yoy, leading to FY20
Target Price (IDR) 8,100 earnings of IDR6.46tn, +31.5% yoy, supported by +6.7% yoy top line growth
with higher EBIT margins for ICBP, Bogasari and its Agribusiness. The FY20 net
Upside/Downside +21.3%
profits are 123% of our full year forecast & 120.5% of consensus estimates,
Previous Target Price (IDR) 8,100 i.e. above.
Stock Statistics
FY20 revenues growth of 6.7% yoy, supported by distribution and ICBP. INDF
Sector CONSUMER reported 4Q20 revenues of IDR22.9tn, +22.4% yoy and 18.4% qoq, leading to
Bloomberg Ticker INDF IJ FY20 revenues of IDR81.7tn, +6.7% yoy. By division, ICBP and distribution
No of Shrs (mn) 8,780 reported the strongest growth of 10% yoy. Agribusiness reported solid 7% yoy
revenues growth thanks to higher ASP from Palm Oil and other downstream
Mkt. Cap (IDRbn/USDmn) 57,829/3,871
products. With lower production, the FY20 CPO sales volume fell 15% yoy while
Avg. daily T/O (IDRbn/USDmn) 80.4/5.6 Palm Kernel (PK) sales volume was down 17% yoy. Meanwhile, Bogasari booked
flattish revenues growth of 1% yoy, mostly supported by sales volume.
Major shareholders (%)
FIRST PACIFIC COMPANY LIMITED 50.1 Higher margins and forex gains supported the FY20 earnings growth. In 4Q20,
VANGUARD GROUP 1.6 INDF reported a wider gross margin of 34.5% (4Q19: 30.5%), leading to a FY20
Estimated free float 49.9 gross margin of 32.7% (FY19: 29.7%). Opex/revenues were maintained at 17.2%
in FY20, as the company continued its promotional activities in 4Q20. Overall,
EPS Consensus (IDR) ICBP reported FY20 EBIT margin expansion to 19.4% (FY19: 16.8%). For
2020F 2021F 2022F Bogasari, the EBIT margin was higher at 7.8% in FY20 (FY19: 7.1%) supported by
Danareksa 597.8 653.1 764.6 ASP adjustments despite higher raw material prices. Agribusiness also posted
Consensus 627.6 709.1 792.1
a stellar EBIT margin of 10.3% (FY19: 3.6%) thanks to higher CPO prices.
Meanwhile, distribution reported a lower EBIT margin of 3.5% (FY19: 5.1%).
Danareksa/Cons (4.7) (7.9) (3.5)
This lifted the FY20 operating margin to 15.5% (FY19: 12.4%). Below the
INDF relative to JCI Index operating line, forex gains (versus FY19 forex losses) supported the earnings
growth. This filtered through to FY20 net profits of IDR6.46tn, +31.5% yoy with
a higher net margin at 7.9%. The FY20 net profits are 123% of our full year
forecast & 120.5% of consensus estimates, i.e. above.

Maintain BUY. At the current share price, INDF is trading at FY21F PE of 10.2x
or at the -1SD average 3-y PE. INDF will continue to benefit from the solid
performance of ICBP post the consolidation of Pinehill. However, the huge
foreign currency denominated debt with significant goodwill may weigh on the
share price. Additionally, the progressive levy on CPO may limit margin
improvements going forward. We maintain our BUY call on the stock with a
lower TP of IDR8,100 based on the average 3-y PE of 12.5x.

Key Financials
Source : Bloomberg Year to 31 Dec 2018A 2019A 2020F 2021F 2022F
Revenue (IDRbn) 73,395 76,593 80,911 91,862 98,780
EBITDA (IDRbn) 10,734 12,544 14,254 15,870 16,384
EBITDA Growth (%) 1.3 16.9 13.6 11.3 3.2
Net profit (IDRbn) 4,166 4,908 5,249 5,735 6,713
EPS (IDR) 474.5 559.0 597.8 653.1 764.6
EPS growth (%) 0.2 17.8 6.9 9.3 17.1
BVPS (IDR) 3,828.3 4,302.5 4,627.3 4,988.3 5,433.2
DPS (IDR) 235.7 236.2 278.3 297.6 325.2
PER (x) 14.1 11.9 11.2 10.2 8.7
x Natalia Sutanto PBV (x) 1.7 1.6 1.4 1.3 1.2
Dividend yield (%) 3.4 3.4 4.0 4.2 4.6
(62-21) 5091 4100 ext. 3508 EV/EBITDA (x) 7.6 5.7 7.2 6.5 6.8
natalia.sutanto@danareksa.co.id Source : INDF, BRI Danareksa Estimates

www.danareksa.com See important disclosure at the back of this report 1

 Exhibit 1. Revenues and Growth Exhibit 2. Net Profits and Growth

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 3. Margins Exhibit 4. Gearing Level

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 5. 4Q20 result

IDR bn 4Q19 3Q20 4Q20 yoy qoq FY19 FY20 yoy 2020F A/F A/C
Revenue 18,748 19,391 22,956 22.4% 18.4% 76,593 81,731 6.7% 80,911 101.0% 101.1%
COGS 13,030 13,041 15,033 15.4% 15.3% 53,877 54,979 2.0% 55,191
Gross profit 5,717 6,350 7,922 38.6% 24.8% 22,716 26,752 17.8% 25,720 104.0% 106.4%
Opex 3,068 3,478 3,448 12.4% -0.9% 13,187 14,095 6.9% 14,693
Operating profit 2,650 2,871 4,474 68.9% 55.8% 9,530 12,657 32.8% 11,027 114.8% 111.7%
Pretax profit 2,554 1,790 5,677 122.3% 217.2% 8,749 12,426 42.0% 9,317
Net profit 1,377 911 2,703 96.3% 196.8% 4,908 6,456 31.5% 5,249 123.0% 120.5%

Gross margin 30.5% 32.7% 34.5% 29.7% 32.7% 31.8%

Operating margin 14.1% 14.8% 19.5% 12.4% 15.5% 13.6%
Pretax margin 13.6% 9.2% 24.7% 11.4% 15.2% 11.5%
Net margin 7.3% 4.7% 11.8% 6.4% 7.9% 6.5%
Source: Company, BRI Danareksa Sekuritas estimates

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 Exhibit 6. Income Statement
Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F
Revenue 73,395 76,593 80,911 91,862 98,780
COGS (53,183) (53,877) (55,191) (62,796) (67,363)
Gross profit 20,212 22,716 25,720 29,066 31,417
EBITDA 10,734 12,544 14,254 15,870 16,384
Oper. profit 7,928 9,530 11,027 12,476 13,479
Interest income 421 475 520 513 500
Interest expense (1,553) (1,727) (1,880) (2,497) (2,279)
Forex Gain/(Loss) (28) 18 (861) 0 0
Income From Assoc. Co’s (95) (105) 33 99 144
Other Income (Expenses) 774 559 478 61 73
Pre-tax profit 7,447 8,749 9,317 10,652 11,917
Income tax (2,485) (2,847) (2,810) (3,213) (3,594)
Minority interest (796) (995) (1,258) (1,704) (1,609)
Net profit 4,166 4,908 5,249 5,735 6,713
Core Net Profit 4,194 4,890 6,110 5,735 6,713

Exhibit 7. Balance Sheet

Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F
Cash & cash equivalent 8,809 13,745 12,622 13,423 11,948
Receivables 6,573 5,964 7,034 7,232 7,700
Inventory 11,644 9,659 9,894 11,258 12,077
Other Curr. Asset 2,128 1,980 2,849 2,597 2,725
Fixed assets - Net 42,388 43,073 45,347 48,066 50,839
Other non-curr.asset 20,877 21,723 80,400 81,953 82,361
Total asset 96,538 96,199 158,202 164,585 167,705

ST Debt 21,631 14,022 13,974 13,656 12,973

Payables 5,501 5,988 6,149 6,812 7,431
Other Curr. Liabilities 4,072 4,677 4,919 5,468 5,872
Long Term Debt 7,490 8,955 39,457 41,007 49,007
Other LT. Liabilities 7,927 8,354 17,471 18,241 9,113
Total Liabilities 46,621 41,996 81,970 85,184 84,397
Shareholder'sFunds 33,614 37,778 40,630 43,799 47,706
Minority interests 16,303 16,425 35,602 35,602 35,602
Total Equity & Liabilities 96,538 96,199 158,202 164,585 167,705

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 Exhibit 8. Cash Flow
Year to 31 Dec (IDRbn) 2018A 2019A 2020F 2021F 2022F
Net income 4,166 4,908 5,249 5,735 6,713
Depreciation and Amort. 2,749 2,646 3,227 3,394 3,592
Change in Working Capital (1,513) 3,668 (2,155) (156) (512)
OtherOper. Cash Flow 799 2,023 1,138 1,981 1,835
Operating Cash Flow 6,201 13,245 7,460 10,953 11,628

Capex (5,644) (3,330) (5,502) (6,113) (6,365)

Others Inv. Cash Flow (7,814) 3,693 (58,158) (1,039) 92
Investing Cash Flow (13,459) 363 (63,660) (7,152) (6,273)

Net change in debt 5,409 (6,750) 31,060 1,292 7,384

New Capital 717 1,452 19,224 48 49
Dividend payment (2,069) (2,074) (2,444) (2,613) (2,855)
Other Fin. Cash Flow (1,680) (1,300) 7,237 (1,727) (11,407)
Financing Cash Flow 2,377 (8,672) 55,077 (3,000) (6,830)

Net Change in Cash (4,881) 4,936 (1,123) 801 (1,475)

Cash - begin of the year 13,690 8,809 13,745 12,622 13,423
Cash - end of the year 8,809 13,745 12,622 13,423 11,948

Exhibit 9. Key Ratios

Year to 31 Dec 2018A 2019A 2020F 2021F 2022F
Growth (%)
Sales 4.6 4.4 5.6 13.5 7.5
EBITDA 1.3 16.9 13.6 11.3 3.2
Operating profit (6.3) 20.2 15.7 13.1 8.0
Net profit 0.2 17.8 6.9 9.3 17.1
Profitability (%)
Gross margin 27.5 29.7 31.8 31.6 31.8
EBITDA margin 14.6 16.4 17.6 17.3 16.6
Operating margin 10.8 12.4 13.6 13.6 13.6
Net margin 5.7 6.4 6.5 6.2 6.8
ROAA 4.5 5.1 4.1 3.6 4.0
ROAE 12.8 13.7 13.4 13.6 14.7
Leverage
Net Gearing (x) 0.4 0.2 0.5 0.5 0.6
Interest Coverage (x) 5.1 5.5 5.9 5.0 5.9

Source : INDF, Danareksa Estimates

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