Miss Earnings but Prospect Remain Intact
Key Takeaways :
▪️ GGRM 3Q23 net profit accumulated to IDR1.2tn, down -11.8% QoQ but up +115.9% YoY. This translates to 9M23 net profit of IDR4.5tn, or rose by +197.6% YoY. These figures are below our/cons estimates, achieving 70.6%/67.3% of the FY23E target.
▪️ We expect GGRM to maintain profitability moving forward, amidst a 10% excise tax increase in FY24F. In 2H24, we estimate retail prices for flagship GGRM products like Gudang Garam Int.’12 to be IDR27,100-27,900/pack, while Surya’16 will be IDR36,200-37,300/pack. We expect a softer ASP adjustment to ensure a smoother decline in sales volume (due to downtrading behavior), translating into a solid market share of ~25%.
▪️ An aggressive ASP adjustment leading to profitability recovery should bolster the dividend value for the FY23E fiscal year. We expected GGRM to deliver a dividend yield of ~11%.
▪️ We reiterate our BUY recommendation for GGRM with a lower TP of IDR31,000. Despite a +20% YTD price increase, a short correction makes the price attractive as it trades near at -1.5 STD PE ratio (5-year-average) of 7.4x.
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