Contact our analyst Eka
BUY, 22% upside
16th May 2023
Price Rp 29,000
Target price Rp 35,500
Investment Consideration
Stable sales
- GGRM booked lower sales volume amid a decline in domestic cigarettes sales volume by -6.5% YoY. Sales value increased +1.5% YoY but was lower -3.4% QoQ at IDR 29.7 trillion in 1Q2023 due to the effects of a higher ASP.
- GGRM’s export sales increased +12% YoY or +25% QoQ to IDR 388 billion in 1Q2023, while GGRM’s domestic sales slightly increased +1.4% YoY but were lower -3.6% QoQ at IDR 29.3 trillion in 1Q2023.
- Machine-made clove cigarettes sales maintained positive growth of +1.2% YoY to IDR 27 trillion, hand-rolled clove cigarettes sales increased at a faster rate of +9.7% YoY to IDR 2.24 trillion in 1Q2023.
- We expect GGRM will maintain positive sales growth of 4.7% YoY to reach IDR 137 trillion in 2023F because of higher prices and stable sales volumes.
1Q2023 Results: Margin improvement
- After a price hike earlier this year, GGRM had a significant improvement in margins.
- GGRM booked a net profit of IDR 1.02 trillion which is +82% YoY or 53% QoQ growth in 1Q2023. The net profit margin improved to 6.6% from 3.7% last year.
- Operating expenses were lower -6% YoY from cost efficiency with lower transportation, freight, advertising and promotion expenses by -18% YoY, resulting in an operating profit of IDR 2.6 trillion with a higher OPM of 8.9% in 1Q2023.
- GGRM’s cost of sales was lower by -2% YoY or -7% QoQ from lower excise tax expenses which fell by -14% YoY, resulting in a higher gross profit of +28% QoQ or +33% YoY to IDR 4.35 trillion.
- We revise up our forecast for GGRM 2023F bottom line profit to IDR 5.19 trillion because of the higher ASP in 1Q2023 and as we are expecting further demand recovery.
Valuation: BUY, TP 35,500
- As we have revised up our forecasts for GGRM in 2023F, we maintain our recommendation to BUY. We are targeting GGRM to trade at a 13X PE within a year. Target Price is IDR 35,500 which represents 22% upside.