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Hold, 15% upside
6th April 2022
Price Rp 920
Target price Rp 1060
Investment Consideration
Fastest Growth Quarter
- In 4Q2021 HMSP’s sales increased +7% YoY or 6% QoQ to IDR 26.35 trillion the highest QoQ growth in 2021. For the full year 2021, HMSP recorded sales growth of +7% YoY to IDR 98.8 trillion after 2 years of decreases.
- HMSP sales volume increased +4.1% YoY to 82.8 billion units. Sampoerna’s brands grew +15% YoY while Dji Sam Soe decreased -8.6% YoY in 2021.
- Hand-rolled white cigarettes (SPT) recorded a 3,115% YoY sales growth to IDR 544.8 billion, while the biggest contributor to sales is still machine-made clove cigarettes (SKM) with a 66% contribution of IDR 65.2 trillion in 2021.
- Hand-rolled Kretek (SKT) sales grew +7% YoY to IDR 22.8 trillion and Machine-Made White (SPM) cigarettes increased +6% to IDR9.4 trillion.
- The growth in 2021 reflects higher prices but offset by a lower market share, mainly due to smokers down-trading to lower tier cigarettes with significantly lower retail prices. We expect more growth in 2022F inline with a recovery in domestic consumption.
Slightly higher margin QoQ
- HMSP margins slightly increased in 4Q2021 with higher volumes and higher ASPs.
- Despite the growth in sales in 4Q2021, HMSP net profit decreased by -5.3% YoY but grew +11.4% QoQ to IDR 1.58 trillion with a slightly higher net profit margin of 6% from 5.7% in 3Q2021. For 2021FY, net profit declined by -17% YoY to IDR 7.13 trillion.
- HMSP’s cost of sales increased +10.3% YoY or +5.6% QoQ to IDR 22.1 trillion in 4Q2021. This resulted in a lower gross profit -7.8% YoY but +7.3% QoQ to IDR 4.18 trillion with a slightly higher gross profit margin of 15.9% from 15.7%.
- Profit before tax decreased by -6.4% YoY but was higher +11.5% QoQ to IDR 2.04 trillion.
- With the recovery in sales volume, we expect HMSP’s sales will grow +8% YoY to reach IDR 107 trillion in 2022F with slightly higher bottom line growth of +6% YoY to give a net profit of IDR 7.59 trillion.
Valuation: TP 1,060 HOLD
- We are targeting HMSP to trade at a 15x 2023F PE within a year. Target Price is IDR 1,060 which represents 15% upside. We maintain our recommendation to HOLD.