HMSP
Contact our analyst Eka
Buy, 35% upside
8th May 2023
Price Rp 1015
Target price Rp 1375
8th May 2023
Price Rp 1015
Target price Rp 1375
Lower volume with higher market share
- HMSP sales volume declined in 1Q2023 by -5.7% YoY to 19.7 billion sticks in line with lower domestic cigarettes sales volume, -6.5%. Lower cigarettes sales volume is due to higher prices of cigarettes in line with higher excise tax.
- Despite lower sales volume, HMSP market share still expanded from 28.3% to 28.5% in 1Q2023 in line with lower domestic sales volume.
- Despite the lower volume, HMSP's sales increased +3.1% YoY but slightly declined-3% QQ to IDR 26.9 trillion.
- HMSP's hand-rolled white cigarettes (SPT) maintained the fastest growth of +36.5% YoY to IDR 260.7 billion, followed by the hand-rolled clove cigarettes (SKT) with +19.6% YoY growth to IDR 7.27 trillion.
- Machine-made clove (SKM) sales declined -1.9% YoY or -2.8% QoQ to IDR 17 trillion, while Machine-Made White (SPM) cigarettes declined by -12.3% YoY or -11% QoQ to IDR 2.01 trillion.
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1Q2023 Results: Margins continue to improved
Valuation: TP 1,375 BUY
- HMSP recorded a higher NPM of 8% in 1Q2023, an increase from 4Q2022’s 5.1% and 7.3% in 1Q2022, from higher prices. Net profit continued to increase at a double digit rate to IDR 2.16 trillion, +52.% QoQ or +12.8% YoY.
- In line with higher sales, cost of sales were slightly up by +1% YoY but declined -4.5% QoQ to IDR 22.1 trillion in 1Q2022. In detail, raw material costs increased +10.7% YoY and excise tax +1.2% YoY, the increases are at a slower rate compared to before. Gross profit had faster growth of +14% YoY or +4.4% QoQ to IDR 4.85 trillion with an improvement in the gross profit margin to 18% in 1Q2023 from 16.3% in 1Q2022.
- Operating profit also increased +10.3% YoY to IDR 2.65 trillion, resulting in a higher OPM of 9.8% in 1Q2023.
- With more stable costs and a higher ASP, we expect HMSP's sales will grow +10% YoY to reach IDR 121 trillion in 2023F with a bottom line profit of IDR 8.3 trillion.
Valuation: TP 1,375 BUY
- With an improved performance from HMSP, we upgrade our recommendation to BUY from HOLD. We are targeting HMSP to trade at a 17x 2024F PE within a year. Target Price is ID 1,375 which represents 34% upside.
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