HMSP Aug2021

HMSP

Contact our analyst Eka

Hold, 14% upside
24th August 2021
Price Rp 975
Target price Rp 1115

2Q2021 Positive Sales Growth

HMSP booked positive sales growth after a decline in 1Q2021 YoY, driven by higher volume and a ASP hike in 2Q2021. HMSP’s sales jumped +14.4% YoY and +2.2% QoQ in 2Q2021 to IDR 24.07 trillion.
Machine-Made Kretek (SKM) had higher growth of 15.8% YoY and is the largest contributor (67%) to total sales in 2Q2021. Hand-rolled Kretek (SKT)followed with a 21.7% contribution to total sales and Machine-Made White (SPM) was 9.8% of total sales.
For 1H2021 HMSP booked sales of IDR 47.6 trillion, an increase of 6.5% YoY.
HMSP’s domestic sales grew +14.4% YoY to IDR 24.03 trillion in 2Q2021, the global markets remain challenging and export sales declined -13.5% YoY or -9.8% QoQ to IDR 38.65 billion in 2Q2021.
We expect the positive sales growth will continue in the next quarters inline with a recovery in domestic consumption.

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2Q2021: Margins Decline

Despite higher sales in 2Q2021, HMSP net profit decreased by -1.2% YoY or -40% QoQ to IDR 1.55 trillion. The increases in ASP and volume has not been enough to cover the decline in the bottom line. But the decrease is better than peers.
As a result, HMSP net profit margin declined to 6% from 11% in 1Q2021.
For 1H2021, net profit declined by -15.4% YoY to IDR 4.13 trillion.
HMSP’s cost of sales increased +18% YoY or +9.5% QoQ to IDR 20.27 trillion in 2Q2021.
For 1H2021 cost of sales also increased +11% to IDR 38 trillion, this resulted in a lower gross profit -9% YoY to IDR 8.8 trillion with a lower gross profit margin of 19 % from 22%.
Profit before tax decreased by -17% YoY to IDR 5.27 trillion from higher advertising and promotion expenses +47% YoY in 1H2021.
We expect HMSP’s sales will still grow +5% YoY to reach IDR 97 trillion but with a lower net profit -7% of IDR 7.99 trillion.

Valuation: TP 1,115 HOLD

We are targeting HMSP to trade at a 15x 2022F PE within a year. Target Price is IDR 1,115 which represents 14% upside. Our recommendation is HOLD.

Previously