KLBF
Contact our analyst Eka
11% Upside
24th September 2019
Price Rp 1665
Target price Rp1850
24th September 2019
Price Rp 1665
Target price Rp1850
Positive impact from PP No. 45 2019
- The Indonesian government recently issued government circular No. 45 2019 on tax deduction for Research & Development (R & D) and vocational training expenses.
- Based on the circular, the amount of tax deduction allowed will be equal to a maximum of 300% of gross profit. This will give a positive impact to KLBF and provide incentive for the company to invest more in R&D.
- As of June 2019, KLBF’s R&D expenses reached IDR 134 billion or 3% of total operating expenses.
- KLBF is still awaiting more details about this.
- KLBF expects the prescription pharmaceutical division revenue will be boosted by specialty products such as oncology products and biological based products in 2020 as KLBF’s domestic biosimilar facility will be operating commercially in early 2020.
- As of 1H2019, most of the Prescription Pharmaceutical division revenue came from branded generic product at 51%, while unbranded generic product and licensed products contributed 21% and 28% respectively.
- Of the prescription pharmaceutical revenue, oncology and biological-based products (unbranded generic products) contributed 7%-8% and are targeted to reach 20%-25% within the next 3 – 5 years. With their focus shifting to specialty products with better margins, KLBF will be able to better manage their sales mix which improves margins, and we expect the margin improvement will take place in 2020.
- We are targeting KLBF to trade at 30x 2020F PE within a year. Target Price is IDR 1,850 which represents 11% upside. HOLD
