GGRM
Contact our analyst Eka
BUY, 23% upside
8th November 2021
Price Rp 33,025
Target price Rp 40,700
8th November 2021
Price Rp 33,025
Target price Rp 40,700
Higher QoQ Sales
- 3Q2021’s GGRSM sales were higher compared to 1Q2021 and 2Q2021 from higher sales volume. GGRM booked sales of IDR 31.5 trillion which is +5.9% YoY or +2.1% QoQ growth. For 9M2021 GGRM booked sales of IDR 92 trillion, an increase of 10.4% YoY.
- As global markets have shown an improvement QoQ but are still in decline YoY, export sales decreased -12% YoY but grew +29.6% QoQ to IDR 549 billion in 3Q2021.
- The domestic market continues to recovery with sales up +6.3% YoY or +1.7% QoQ to IDR 30.9 trillion in 3Q2021.
- Machine-made clove cigarettes sales increased +6% YoY to IDR 28.9 trillion, while hand-rolled clove cigarettes sales decreased -2.4% to IDR 2.11 trillion.
- GGRM sales performances in 9M2021 was better compared to its peers. We now expect GGRM sales to reach IDR 128.5 trillion or +12.2% growth this year.
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Margins Improved QoQ
Valuation: Upgrade to BUY with TP 40,700
- GGRM margins showed an improvement in the 3Q2021 after a weak performance in the 2Q2021, GGRM net profit increased by +224% QoQ but still decreased slightly -0.2% YoY to IDR 1.82 trillion. The increase was mainly due to lower operating expenses down -20% YoY.
- As a result, GGRM net profit margin increased to 5.8% from 1.8% in 2Q2021.
- For 9M2021, net profit still decreased by -23% YoY to IDR 7.5 trillion.
- GGRM’s cost of sales increased +8.8% YoY but slightly decreased -2.1% QoQ to IDR 27.6 trillion in 3Q2021. This resulted in a lower gross profit -11% YoY to IDR 3.86 trillion, but the gross profit margin improved to 12.2% from 8.5%. In 2Q2021.
- With lower opex, operating profit slightly decreased by -3.4% YoY but increased +220% QoQ to IDR 2.3 trillion in line with a higher operating profit margin, of 7.4% from 2.4%.
- Negative sentiment still weighs on the cigarettes sector as the government plans to further increase excise tax net year. After these results we expect GGRM’s profit will decrease -22% YoY to IDR 5.9 trillion.
Valuation: Upgrade to BUY with TP 40,700
- As GGRM has shown an improvement in 3Q2021 performance with better QoQ sales and margins, we upgrade our recommendation to BUY.
- We are targeting GGRM to trade at a 12x 2022F PE within a year. Target Price is IDR 40,700 which represents 23% upside. We recommendation to BUY.
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