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GGRM

Contact our analyst Eka
Hold, 11% upside
8th July 2022
​Price Rp 31,575

Target price Rp 35,240
Sales decline while peers rise
  • As of 1Q2022, GGRM  sales decreased slightly -1.5% YoY or -10.7% QoQ to IDR 29.29 trillion while peers like HMSP and WIIM had growth of +11% +32% YoY respectively. The total domestic cigarette market sales volume also increased 5.8% YoY to 75 1 billion sticks.
  • GGRM’s export sales decreased -20.8% YoY or  -10.7% QoQ to IDR 346.9 billion. GGRM’s domestic sales also declined -1.2% YoY or -10.7% YoY to IDR 28.94 billion in 1Q2022.
  • Machine-made clove cigarettes sales decreased -1.7% YoY or -10.9% QoQ to IDR 26.7 trillion, while hand-rolled clove cigarettes sales also decreased -6.3% YoY or -8.3% QoQ to IDR 2.05 trillion in 1Q2022.
  • With Ramadan season in 2Q2022 we expect slower growth compared to other quarters. But for 2022F, we expect GGRM sales will have positive growth of 9.5% YoY to IDR 136.8 trillion. 

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 Lower margins
  • GGRM net profit decreased  by -38% YoY and -27% QoQ to IDR 1.07 trillion.
  • The margins continued to decline in 1Q2022, with the NPM falling to 3.7% from 4.5% in 4Q2021.
  • Operating expenses continue to increased +9% YoY to IDR 1.8 trillion, resulting in a decrease in operating profit by -35% YoY or -28% QoQ to IDR 1.46 trillion in line with a lower operating profit margin, of 5.0% from 6.2%.
  • GGRM’s cost of sales increased +1% YoY but was lower compared to the 4Q2021 by -10% QoQ to IDR 26.01 trillion in 1Q2022. This resulted in a decline in gross profit of -16% YoY to IDR 3.27 trillion, inline with a lower gross profit margin of 11.2% from 11.8% in 4Q2021.
  • Despite the margin contraction, we expect GGRM’s bottom line will reach IDR 5.76 trillion this full year.
  • In 30 June 2022, GGRM declared  a dividend for fiscal year 2021, with a total value of IDR 4.32 trillion or IDR 2,250 per share, which is a yield of 7%.

Valuation: HOLD, TP 35.240
  • We are targeting GGRM to trade at a 10.57X PE within a year. Target Price is IDR  35.240 which represents 11% upside. We downgrade our recommendation to hold.
Read the full report
Previously
​GGRM Apr2022
​GGRM Nov2021
​GGRM Aug2021
​GGRM Jun2021
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