SRIL

Contact our analyst Eka

Double digit growth, 51% upside.
12nd September 2018
Price Rp 340
Target price Rp510

Double digit revenue growth

• As the new capacity expansion started to operate last year, SRIL grew double digits in 1H2018 and we expect sales to enjoy 35%-40% growth, net profit 20%-25% growth in 2018.
• In 1H2018, SRIL saw sales grow 36% yoy to USD 544 million, gross profit USD 98 million grew 13% yoy, operating income grew 45% yoy to USD 99.9 million and net profit grew 68% yoy to USD 56.3 million.
• Gross margin in 1H2018 was 18%, lower compared to 1H2017’s 22% due to higher sales from the spinning segment. Net profit margin grew slightly to 9.0% from 8.7% in 1H2017.
• We estimate 2018 sales and net profit will grow strongly at 37% and 25% to USD 1.04 billion and USD 85.2 million respectively.

Expand the Spinning Sector

• SRIL has expanded their spinning by acquiring two spinning companies in April 2018.
• The 2 companies are PT Bitratex Industries (BI) and PT Primayudha Mandirijaya (PM). SRIL acquired 100% of the shares in BI and PM with a total transaction value of USD 15.3 million.
• As of 1H2018 spinning contributed 48% of sales, higher than 1H2017’s 40%. However, the spinning segment has lower margins compared to other segments, causing the gross and EBITDA margins to decrease about 1%-2%.
• There will still be a positive effect from the acquisitions as they will boosts the company’s future sales. And the company plans to maintain margins by managing their product mix (future higher contributions of other segments such as finishing and garment segments).

Valuation: TP 510, 51% Upside

• With the capacity expansion completed and assuming double digit growth for the 2H 2018, we target SRIL to trade at 7x 2019F PE, which is around IDR 510 per share.
• 51% potential upside within one year. BUY​

Read the full report

Previously

​sril_13june2017.pdf