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KLBF

Contact our analyst Eka
4% Upside
28th September 2018
Price Rp 1355
Target price Rp1410
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Increasing ASP
  • The Rupiah has depreciated sharply against the USD since June 2018. In June 2017 the Rupiah was IDR 13,941 and has increased 7.7% to reach IDR 15,013 in September 2018. The Impact of the weakening Rupiah on KLBF’s COGS is around 3.5% for every 10% rupiah depreciation. If the depreciation is above 5%, it will start to impact KLBF’s gross margin.
  • To maintain the gross margin, KLBF plans to increase ASPs in the nutritional and consumer health divisions as most of raw materials (like skim milk powder) are imported.
  • We are targeting the company to maintain GPM in 2018F at 48%.
Expecting Stable Revenue and Profit
  • We revise KLBF’s target revenue based on 1H2018 result and Rupiah depreciation, to IDR 20.8 trillion which is slight growth of 3.2% yoy.
  • Earlier in 2018, KLBF target for revenue growth was around 7%-9% and has been revised to around 5% - 7%. With operating margin at around 14.5% - 15.5%, EPS growth will be around 5%-7%.
  • In 1H2018, KLBF booked revenue of IDR 10.4 trillion up 3.12% yoy. Net profit decreased slightly -0.03% to IDR 1.215 billion.
Focus on biology based Prescription Pharmaceutical
  • KLBF will focus on biology based prescription pharmaceuticals (Biosimilar) as their Biosimilar plant has been inaugurated in February 2018.
  • With the new Biosimilar plant, KLBF has produced speciality-drugs such as Erythropoietin (EPO) a hormone that can produces red blood cells. Later KLBF will be the first to produce insulin in Indonesia.
  • We expect the ability to produce speciality-drugs, will help to boost the performance of the pharmaceutical segment.
Valuation: HOLD TP 1,410 with 4% upside
  • We targeting a stable KLBF’s performance in 2018F as KLBF has revised their own target under pressure from Rupiah depreciation.
  • Using DCF valuation with WACC at 12.30% We are targeting KLBF to trade at 26x 2019F PE within a year. Target Price is IDR 1,410 which represents 4% upside. HOLD
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