Gudang Garam
(GGRM.IJ, HOLD) - Lower Profit From Higher Raw
Material
Gudang Garam’s 9M12 net profit of
IDR3,006b, down 21% YoY, was below our expectations. The main reason was the
sharp increase in costs of goods sold (CGS). While revenue was up 16% YoY to
IDR35,599b, CGS spiked 26% YoY. Raw material costs surged 42% YoY in 9M12, a
key reason for the higher CGS. This is in line with the experience of other
cigarette producers, all of whom posted soaring raw material costs. Excise and
VAT, which were up 21% YoY to IDR19,610b also contributed to the CGS increases.
On a quarterly basis, 3Q12 performance was weak. Despite the Ramadhan and Eid
festivities, QoQ revenue was flat. As we lower our forecasts due to the poor
result, we downgrade our recommendation to HOLD. Our new TP of IDR55,300 pegs
the stock at 18.3x FY13F PER, implying an FY13F EV/EBITDA of
12.1x.
source: KIMENG dated 31 October 2012
