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PZZA

Contact our analyst Eka
49% Upside
17 Oct, 2019
Price Rp 1080
Target price Rp 1610
Expanding Outlet
  • PZZA has opened more outlets as the company has agreed with Yum! (the franchisor of Pizza Hut) to target an additional 175 new outlets during 2017 – 2019.
  • If the target is achieved,  PZZA is entitled to incentives from Yum! which will reduce franchise costs.
Increasing production capacity
  • As the outlet expansion requires increased production and distribution capacity, PZZA plans to expand and upgrade their facilities.
  • PZZA plans to triple the size of its sausage production factories. The new factory will have capacity of  3,150 tons/ year and is expected to start operating in 1Q 2020.
  • PZZA also plans to expand its pasta facility and add a new frozen dough facility.

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Double-digit growth and steady margin
  • We are targeting PZZA to grow double-digits top and bottom line in 2019F with a good result expected in the second semester.
  • As of 1H2019, PZZA recorded revenue growth of 12% YoY to IDR 1.94 trillion from 1.72 trillion in 1H2018. Gross profit also grew 12% YoY to IDR 1.3 trillion with a steady gross profit margin at 67.4% in 1H2019. Operating profit recorded a slight increase of 5% YoY to IDR 134 billion, and the operating margin remained at 7%. Net profit grew 22% YoY to IDR 100 billion, as the net margin increased to 5.2% from 4.8% in 1H2018.
  • We are targeting PZZA to grow bottom line profit 21% in 2019F to IDR 210 billion with a steady margin at 5.2%.
Valuation: Buy TP 1610, 49.7% Upside
  • We are targeting PZZA to trade at 20x 2020F PE, which is IDR 1610 per share or 49.7% potential upside within one year. We recommend to BUY
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