20% Upside, BUY

28th October, 2021

Price Rp 1,595

Target price Rp 1,920

Investment Consideration

Record Quarterly Sales

• KLBF recorded record sales of IDR 6.73 trillion, the highest quarter in 2021 so far and up +22.5% YoY or +5.9% QoQ in 3Q2021. For 9M2021, KLBF net sales increased +11.7% YoY to IDR 19.1 trillion.
• All KLBF’s business segments recorded positive growth in 3Q2021, with distribution & logistics recorded growth of +42% YoY to IDR 2.47 trillion and is still the largest contributor to total sales. Pharmaceutical and nutrition recorded positive growth of 23% and 4.3% to IDR 1.49 trillion and IDR 1.85 trillion respectively in 3Q2021.
• Consumer health also grew 109% YoY to IDR 915.7 billion.
• In terms of 3Q2021 gross profit margins, distribution and logistics was flat at 24%. Consumer health increased to 60% from 58% in 3Q2020, pharmaceutical slightly decreased to 53% from 58% in 3Q2020, nutrition also decreased to 51% from 55%.
• As demand continues to increase, we expect strong growth in the next quarters. We are targeting KLBF 2021 sales to reach IDR 24.8 trillion.

Net income improved

• Inline with double-digit growth in sales, KLBF also booked higher QoQ net income, up +24% YoY or 1.2% QoQ to IDR 790 billion in 3Q2021. The NPM was stable  at 12.3%.
• For 9M2021, KLBF recorded a net profit increase of +13% YoY to IDR 2.29 trillion with a slightly higher NPM of 12%.
• Because of higher commodity prices and raw material costs, COGS increased 29% in 3Q2021. As a result,  KLBF gross profit increased +14% YoY or 4.8% QoQ in 3Q2021 to IDR 2.88 trillion. This resulted in a lower gross profit margin of 42.8% from 46% in 3Q2020.
• Operating profit increased by +19% YoY to IDR 1.04 trillion, while the operating profit margin decreased slightly to 15.6% from 16%.
• We are forecasting KLBF 2021 net profit will grow double digit +16% YoY to reach IDR 3.18 trillion.

Valuation: BUY TP 1,920 with 20% upside

• We are targeting KLBF to trade at 25x  PE within a year. Target Price is IDR 1,920 which represents 20% upside. We maintained our recommendation to BUY.