GGRM Q2 2022 Result - Binaartha Sekuritas

Contact our analyst Eka

Hold, 16% upside

11th August 2022

Price Rp 25,400

Target price Rp 29,530

Investment Consideration

Sales Increased

GGRM sales increased +5% YoY or +11% QoQ to IDR 32.4 trillion inline with an increase in total domestic cigarette sales of +6.6% in 2Q2022. For 1H2022, GGRM booked +2% sales growth to IDR 61.6 trillion.
GGRM’s export sales increased +4.2% YoY or +27% QoQ to IDR 441 billion after a decrease in 1Q2022. GGRM’s domestic sales also increased +5% YoY or +10% QoQ to IDR 31.9 trillion in 2Q2022.
Machine-made clove cigarettes sales increased +5% YoY or +11.7% QoQ to IDR 29.8 trillion, hand-rolled clove cigarettes sales also increased +5% YoY or +4.2% QoQ to IDR 2.13 trillion in 2Q2022.
With better-than-expected GGRM sales in 2Q2022, we expect GGRM will maintain positive sales growth of 9.5% YoY to IDR 136.8 trillion.

2Q2022 Results: But bottom line was a loss

Despite positive sales growth, GGRM booked a loss in 2Q2022 of IDR -122 billion after a net profit of IDR 1 trillion in 1Q2022. For 1H2022, GGRM still booked a net profit of IDR 955 billion, but that’s a drop of -59% YoY.
The margins continued to decline in 2Q2022, with a negative NPM of -0,4%, and decreased to 1.5% in 1H2022.
Operating expenses continue to increase +2% YoY to IDR 1.94 trillion, resulting in an operating loss of IDR -72 billion with a negative OPM of -0.2% in 2Q2022.
The excise/sales ratio also become bigger at 93% in 2Q2022, while in 1H2022 it reached 82.2% compared to 75.6% 1H2021. This resulted in an increase of GGRM’s cost of sales, +17% YoY and a drop in gross profit of -29% YoY or -43% QoQ to IDR 1.86 trillion, inline with a lower gross profit margin of 5.8% from 11.2% in 1Q2022.
With the lower-than-expected GGRM bottom line profit, we revise down our GGRM 2022F bottom line profit target to IDR 2.9 trillion or a -47% decrease.

Valuation: HOLD, TP 29,530

We are targeting GGRM to trade at a 17X PE within a year. Target Price is IDR 29,530 which represents 16% upside. We maintained our recommendation to hold.