Company Update

13 Oktober 2022

GGRM IJ - MNC Sekuritas Equity Report October 13, 2022

Awaiting for Political Years
Key Takeaways
• GGRM has increased its retail price by 2-5% in Jul-Sep’22. Thus, this makes the price competition on SKM tier 1 to be more competitive and potentially increases GGRM’s revenue in 2H22.
• Along with the political year in FY24F, we expect GGRM could catch the momentum to boost its sales volume. Historically, in the 2 previous election moments, sales volume surged compared to usual sales with average in FY14-FY19 by 8.96%.
• In our report “Foreseeing a Threat and Opportunities Onwards”, we estimate the weighted-average-excise-tax on cigarette is likely to increase by +10%, followed by +8.5% increase in HJE.
• However, we consider that if the GGRM fails to adjust its retail price quickly, the potential increase in excise-tax by double-digit will lower the margin. In our models, to uphold its margin, GGRM needs to adjust its retail prices by ~11%.
• We are still waiting for the government's official plan regarding future excise-tax regulations, and is likely to be announced in 4Q22.
• We recommend HOLD GGRM with target price of IDR23,000. We roll over our valuation to FY23F and projected the revenue and net income growth in FY23F of +9.63% YoY/-12.27% YoY, respectively, mainly driven by; 1) higher sales volume on SKM +5.50% YoY; 2) increase of SKM excise-tax +12.20% Yo
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