31 Oktober 2018

PT Industri Jamu dan Farmasi Sido Muncul Tbk SIDO

Proven to Achieve Good Health


Bottom-Line Pops Double Digits in 9M18
SIDO managed to record a top-line of 4.67% YoY to IDR1.94 tn in 9M18 (vs IDR1.86tn in
9M17), supported by growth of the herbal and pharmaceutical product segments, which
contributed 65.72% and 3.96% to total sales, respectively, with growth of 7.46% and
12.44% YoY. Higher recovery rate of raw material’s extraction and higher selling price
successfully boosted up the gross profit margin at 50.77% (vs 45.70% in 9M17).
Meanwhile, SIDO also managed to record a bottom-line that jumped by 26.22% YoY to
IDR480.11 bn, with a net profit margin maintained at 24.69% in 9M18. This achievement
reflects 74.54%/76.46% of Consensus/MNCS FY18E estimates. As royalty fees expired in
2M18, an increase in ASP for the herbal medicine segment boosted bottom-line

Production Capacity Enhancement as a Strategy to Meet Global Market Demand
SIDO plans to raise production capacity from 100 million packs per month to 180 million,
as a strategy to further bulk up revenue. A second liquid herbal facility targeted to be
completed in December 2018, is to have a capacity of 100 million packs per month. Thus,
a FY18E/FY19F herbal medicine segment revenue growth projection of up to 10%/12%
YoY realistic. Furthermore, SIDO seeks to penetrate export markets in various countries
such as Philippines (population of 107 million, with a culture similar to that of Indonesia).
In FY19F, SIDO plans to build a plant in Nigeria (population 196 million) to respond to
significantly-increased demand for SIDO products. The export sales portion is targeted for
a ~5% increase over the 1H18 position, still below 2% of total sales.

Recommendation: Maintain BUY with a Target Price of IDR1,050
We recommend BUY for SIDO at a TP: IDR1,050, which implies PE/PBV 25.08x/5.09x on
FY18E and 22.22x/4.88x in FY19E. Its stable financial position and strong brand positioning
should be able to drive growth. Meanwhile, the rampant circulation of illegal (and
potentially dangerous) herbal products, and the availability of raw materials for SIDO, are
main points that need to be considered. At present, SIDO is currently trading at level +0.5
STD PE Ratio (3-year average PE) with a current PE level of 18.91x.

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