SIDO
Contact our analyst Eka
30% Upside
23rd April 2020
Price Rp 1180
Target price Rp 1540
23rd April 2020
Price Rp 1180
Target price Rp 1540
Positive Performance amid Covid-19 Outbreak
- In 1Q2020, SIDO recorded single digit growth in net sales. Net sales grew by 2.4% yoy to IDR 731 trillion, with domestic sales growing at a higher single digit rate. SIDO Modern trade (MT) distribution remains strong, while SIDO General Trade (GT) has slowed down due to the social-distancing and local quarantine in some areas which resulted from appeals by the Government in early March 2020.The covid-19 outbreak impact can also be seen in the decline of export sales but this was netted off by higher domestic sales. Most of SIDO export destinations like the Philippines, Myanmar and Nigeria have imposed lockdowns causing shipment and logistic constraints. Export sales declined to a 2% contribution to sales in 1Q2020, half the 4% contribution in 2019FY.
- As for the segments, Herbal & Supplement sales had a higher contributor to revenue at 68% with 2.5% growth, followed by Food & Beverage sales which contributed 27% with 2.1% growth and Pharmacy sales which contributed 4% with 2.4% growth.
- Management has lowered their 2020 revenue target to flattish growth and bottom line growth to mid single-digits because of covid-19 leading to weaker purchasing power.
- SIDO recorded double digit bottom line growth of +10.9% YoY to IDR 232 billion in 1Q2020. The growth was driven by operational production efficiencies and a lower effective tax-rate.
- Operating profit grew +9.7% YoY to IDR 286 billion, in line with a +7.8% YoY growth in gross profit to IDR 408 billion.
- As a result, SIDO margins increased in 1Q2020, with the gross profit margin at 56%, Operating margin at 39% and the Net profit margin at 32%.
- Meanwhile in February 2020, SIDO launched a new product “Sido Muncul Natural – a Soft-Gel Capsule” with 7 varieties: Tolak Angin, Tolak Linu, VCO and Vitamin.
- Because of the impact of Covid-19, we lower our SIDO sales target in 2020F to IDR 3.2 trillion but keep a higher bottom line target as we expect SIDO’s strategy to improve operational efficiency and reduce the tax rate will continue to have an impact throughout 2020.
- We are targeting SIDO to reach IDR 1,540 or 30% upside, which is a 22x PE valuation within one year. Maintain BUY.
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