SRIL500

SRIL

Contact our analyst Eka

Double digit growth, 43% upside.
19 July 2019
Price Rp 350
Target price Rp500

Higher US sales

While the trade war has weighed on market conditions, SRIL has increased export sales to the United States (US).
As of 1H2019, SRIL net sales increased 16.2% to USD 631.6 million from USD 543.8 million in 1H2018.
The Spinning segment dominated with a sales contribution of 40.1%. The Finishing segment and Garment segment contributed 26.73% and 26.74% respectively, while Weaving contributed 6.4%.
Export sales contributed 59.8% in 1H2019 net sales, or USD 377.7 million and grew by 29.4% YoY compared to 1H2018 USD 291.7 million.
Higher 1H2019 export sales came from higher US’s sales which jumped 3.2x or contributed 13.6% to export sales and were worth USD 51.35 million from USD 15.98 million in 1H2018.

Better margin

As of 1H2019, SRIL recorded net profit of USD 63.25 million up 12.3% YoY compared to 1H2018 USD 56.33 million. The 2Q2019 net profit was USD 35.2 million up significantly by 25.5% compared to 1Q2019 net profit of USD 28.05 million. The net profit margin in 2Q2019 is getting better at 11.2% compared to 1Q2019 8.9%.
Gross profit grew 34% YoY to USD 131.1 million and give a positive impact to the 2Q2019 Gross profit margin of 21.1% higher compared to 2Q2018 17.9% and slightly up from 1Q2019 20.5%.
As SRIL is focusing on increasing utilization to 90% for all business segments and targeting higher margins in their Finishing and Garment segments in 2019, we expect SRIL’s net profit to grow 14% YoY to USD 96.15 million in 2019F.

Valuation: Maintain Buy TP 500, 43% Upside

We are targeting SRIL to trade at 7x 2020F PE, which is around IDR 500 per share or 43% potential upside within one year. Maintain BUY

Previously

SRIL Sept 2018