PT Nipress Tbk (IDX:NIPS)nipress.com/wp-content/uploads/2018/10/Nipress... · Introduction to PT Nipress Tbk Established in 1970, Nipress is currently listed in IDX with a market

October 12th, 2018

PT Nipress Tbk (IDX:NIPS)Corporate Presentation

1

Nipress – Our Team Seasoned management with a combined tenure in Nipress of +50 years

Jackson Tandiono – President Director

Joined Nipress in 2000 after multiple roles in the USA and Singapore; appointed as President Director in 2012

BSc in Finance from University of Southern California.

Herman Slamet – Independent Director

Joined Nipress in 1997 after 15 years in senior roles in battery business, currently holds the position of Independent Director.

Bachelors in Marketing and Masters in Finance from University of Surabaya

Richard Tandiono – Director

Started his career with Nipress in 2006; appointed Director of Nipress2012 and President Director of NEO1 in 2016.

BSc and MSc in Engineering University of Southern California

Richard Tandiono

Director

Jackson Tandiono

President DIrector

Herman Selamat

Independent Director

1. NEO = PT Nipress Energi Otomotif, a majority-owned subsidiary of Nipress with operations in automotive batteries; Nipress spun-off its battery business to NEO in Jun-16

2

Agenda

Nipress: A leading player in Indonesia’s energy storage solutions

Automotive: Consistent market share gains

Industrial: Sole local producer of industrial lead acid batteries in Indonesia

Historical performance

Welcoming Johnson Controls: The global leader in automobile batteries

Growth plan

3

Introduction to PT Nipress TbkEstablished in 1970, Nipress is currently listed in IDX with a market cap of IDR608bn1

1970

Established as JV between

NippondechiKogyo Co

with PT PemudaExpress

1972-1991

Became a fully local entity

and listed in the Stock

Exchange in 1991

1992-2006

Grew product line to serve 4W and 2W under the

“NS” brand and other

private labels

2007

Entered the industrial

segment by providing

batteries for solar power

plant

2010-2014

Developed maintenance

-free (MF) batteries

Expanded its

OEM and

exporting to key markets

across the globe

2015-now

Launch of NS Maintenance-

free line

Spun-off its auto business

to NEO

JCI acquires

24.5% stake in NEO

1. Closing price as of 8-Oct-18

After years of collaboration, Johnson Controls Intl (JCI), the global leader in lead acid batteries, acquired 24.5% stake in NEO in 4Q18

4

PT Nipress Tbk

(IDX: NIPS)

• Market Cap1: IDR608bn

• Public float: 41%

• Revenues LTM18: IDR1.08tn

• ROE LTM18: 5.2%

• Production capacity:

4W: 3m batteries

2W: 5m batteries

Indst’l: 544KwH

Nipress: Key MilestonesLeading provider of energy storage solutions in Indonesia

1. Closing price 8-Oct-18; 2. Based on revenues of the 6 month period ending 30-Jun-18 (1H18)

Automotive2

(under NEO, a subsidiary)Industrial2

• OEM for notable auto brands

• 3rd largest player in replacement space

• c. 15% share of the domestic market

• Exporting to 4 continents

The only local manufacturer of

industrial lead-acid batteries in Indonesia

60%Of revenues

13%Of revenues

27%Of revenues

Renewable energy

TelcoOthers

(traction / military)

5

Agenda






Growth plan

6

Nipress’ auto business (73% of total revenues)Consistent market share gains amidst soft growth of Indonesian automotive sector

Placed by auto manufacturers at

assembly; under NS brand

OEM

Export to numerous markets across 4

continents

Exports

Replacement market; divided to NS-branded

and private labels

Replacement

Contribution to auto rev’n 1H18

18%(15% 4W, 3% 2W)

58%(42% 4W, 16% 2W)

25%(24% 4W, 1% 2W)

Revenue 1H18 YoY gr.

+106% +17% -40%

Growth trendsRapid growth of NS via

market share gains, beating soft auto sector

Focus shift towards higher margin NS-branded, riding

on the back of OEM growth1

Rationalizing portfolio away from non-profitable

markets

1. Based on internal research, most buyers will opt for the same brand of batteries currently installed in their car upon replacement

1 2 3

Total auto

+0.9%YoY

softer due to drag from rationalizing

exports

7

Auto market: Soft growth of new motor vehicle sales over the past 3 years

1.230 1.208

1.0131.062 1.080

534 554

2013 2014 2015 2016 2017 1H17 1H18

New car sales in Indonesia1

(‘000 units)

New motorcycle sales Indonesia1

(‘000 units)

7.744 7.867

6.4805.931 5.886

2.7013.003

2013 2014 2015 2016 2017 1H17 1H18

1. Gaikindo and AISI data

+3.2% CAGR 15-17

Market has potential to recover; motorized vehicle ownership per capita in Indonesia is still lowvs. emerging market peers

8

OEM: NS OEM batteries grew strongly amidst soft market growth

Growth of new car sales vs. Nipress 4W OEM(‘000 units)

Growth of new moto sales vs. Nipress 2W OEM(‘000 units)

1. Gaikindo and AISI data

-3,2% 3,2% 3,8%

51,4%

8,4%

82,6%

CAGR '13-17 CAGR '15-17 YoY 1H17-18

Indonesian new car sales Nipress 4W OEM

-6,6% -4,7% 11,2%

381%

102%

38%

CAGR '13-17 CAGR '15-17 YoY 1H17-18

Indonesian new motorcycle sales Nipress 2W OEM

1

In IDR terms, NS OEM batteries grew +106% YoY 1H17-18, beating the market by a wide margin

NS OEM 2W still development phase in

‘13

9

OEM 4W: Nipress is a trusted supplier to leading auto brands; with more brands/models in the pipeline

BRANDNEO MARKET

SHARE1

NOTABLE SELECTED MODELS(Market share in brackets)

100 %

10 %

50 %

100 %

90 %

Datsun GO

(100%)

Xpander

(100%)

Wagon R

(100%)

Glory 580

(100%)

Luxio

(50%)

Datsun GO+

(100%)

Pajero Sport

(100%)

Datsun

GO Cross

(100%)

Glory 330

(100%)

GrandMax

(50%)

Futura

(100%)

Travello

(50%)10 %

Market share of 4W market is ~20%1

1

1. Most recent data

Colt diesel

(100%)

Supercab

(100%)

10

OEM 4W: Xpander became Indonesia’s #1 selling model in 1H18

After multiple years of holding the #1 spot, Toyota Avanza met a strong challenger with its

1H18 sales of 39,455 units being edged out by Mitsubishi Xpander’s 39,948 units

1

11

BRANDNEO MARKET

SHARE1

NOTABLE SELECTED MODELS(Market share in brackets)

Next

(100%)Address

(100%)

Satria FU

(100%)

Vario non

ISS

(100%)

Beneli PP

(50%)

30%

13%

10%

50%

OEM 2W: Gaining market share after its launch in 2013; other ASEAN OEMs also in pipeline

Market share ~15%; currently in talks with OEMs in Malaysia and The Philippines

1

Top 3 brands:

>90% of 2W market

1. Most recent data

Beat

(50%)

Vega R

(100%)Jupiter Z

(100%)

Mio, Fino,

X-ride,

Xeon

(30%)

12

OEM 2W: Accelerated market share gains in 2018

2,4% 2,5%

6,5%

>15.0%

Avg. FY17 Mar-18 Jun-18 Current

Nipress market share in 2W OEM(% of volume sold)

1

>6x

13

OEM: Strong gains in 2018 with more brands/models in the pipelineSuccess in OEM will help drive growth in replacement

1

49 51

69

27

59

4 5

16

7

1053 56

85

34

70

2015 2016 2017 1H17 1H18

4W 2W

Nipress’ Automotive OEM Segment Sales(IDR bn)

CAGR 15-17

YoY 1H17-18

+26%Total

4W

2W

+18%

+98%

+106%

+117%

+58%

• Success of Mitsubishi Xpander and Pajero boosted 4W sales

• Increased penetration in Honda motorcycles

2W NS OEM launched in ‘14

Key accounts in Mitsubishi, Yamaha, Honda completed testing and ramped-up orders

Catalyst for future growth:

• Growth of auto market; vehicle ownership in Indo still low

• Nipress’ proven ability to acquire strong models

14

Replacement: A bigger market, approx. 4-5x the size of OEMsNipress is the 3rd largest player in the space with potential for further gains

car battery

6Mmotorcycle battery

36M

Annual battery demand1 Annual battery demand1

Replace-

ment

battery 4.9M

OEM

battery 1.1M 30M 6MOEM

battery

1. Estimate for FY17; 2. Nipress research

2

Growth of NS-branded OEM will help boost future replacement sales as most buyers opt for the same brand of batteries as those currently installed in their vehicles2

NS market share in 4W replacement:

~12%NS market share in 2W replacement:

~5%

Replace-

ment

battery

15

Replacement: Nipress tackles the replacement market with its NS-branded and private-labeled batteries

Private-label: Nipress produces high quality batteries for notable brands

NS-branded: Launched in late ‘15, NS-branded batteries have been gaining traction

MALAYSIA JAPAN

GLOBAL BRAND

GLOBAL BRAND INDIA

2016

2017

2015

Launched 4W

passenger; 1st to

offer official warranty

Late ’17 launched NS for

2W and 4W commercial

Building NS distribution

network

Using its own brand, Nipress can capture a larger

portion of the value chain = higher margins

2

Growth focus is shifting away from private labels to NS-branded batteries

Distribution points 11 Jan-16 47 today

16

Replacement: Advantages of NS-branded batteries

Trademarked technology1

creates highly durable batteries that is more

vibration-resistant with lower discharge rates

High durability

Prices for NS-branded batteries

are up to 10% lower vs. leading brands

Value for money

First to offer manufacturer-official warranty up to 18 months, unmatched in the market (36 months to be

launched)

Manufacturer official warranty and commitment to service

2

1. Developed in partnership with Johnson Controls Intl (JCI)

Up to

10%lower price vs. leading brands

17

Replacement: Building distribution network in FY16-17; adopted from JCI’s successful models in other emerging countries

2

2015 2016 2017 2018

Dec ‘15 Dec ‘16 Dec ‘17 Jun ‘18 Sep ’18 Q4 2018

11 34 35 38 47 53

# of distribution

points

18

60 66 43 51

266 277

150175

314 326343

193226

2015 2016 2017 1H17 1H18

NS Private-label

Replacement: Higher-margin NS batteries are expected to drive growth

Nipress’ Automotive Replacement Segment Sales(combined 4W and 2W, IDR bn)

CAGR 15-17

YoY 1H17-18

+5%Total

Private label

NS-branded

-6%

NM(’15 negligible)

+17%

+16%

+19%

Focus shifting towards NS

Catalyst for growth in NS:

• Boost from growth of OEM1

• Strong product supported by ramp-up of distribution network

1. Based on research, most buyers will opt for the same brand of batteries that is already installed in their car upon replacement

Gradual scale-up of NS’ brand equity and distribution network

2

19

Exports: Nipress is an emerging player in the global battery space with presence across 4 continents

3

South America 7%

Europe3%

Africa25%

Middle east20%

Other AsIa9%

ASEAN36%

Nipress’ Presence around the Globe(FY17, volume)

Focus market

Malaysia = c. 80% of ASEAN sales

20

Exports: Decline in 1H18 due to tariffs on exports to Saudi; potential for strong recovery going forward

3

271 266307

157

92

8,2 9,9

6,9

3,4

4,4

279 276

314

161

96

2015 2016 2017 1H17 1H18

4W 2W

Nipress’ Automotive Export Segment Sales(IDR bn)

CAGR 15-17

YoY 1H17-18

+6%Total

2W

4W

-9%

+7%

-40%

+26%

-42%

Won large contract in Saudi Arabia; “introductory prices” to capture market at

the expense of margins

Changes in tariff policy in Saudi makes pricing no longer attractive; shift portfolio towards more profitable markets

Recovery potential from JCI’s network and Nipress’ regional knowledge:

• ASEAN markets for 4W

• International markets for 2W

With JCI network, monthly orders from Malaysia has doubled in 3Q18 (~30% contribution 1H18)

1. Tariffs imposed for Korean-sourced products in saudi (a certain % of Nipress’ materials are sourced from Korea)

21

Agenda






Growth plan

22

Nipress’ industrial business (26% of total revenues)Drag from gov’t budget cuts to off-grid solar farms; effect has largely bottomed-out

Power storage for panels for off-grid solar farms, home

systems, street lights

Renewable Energy

Traction, military and other industrial uses

Others

Standby power for BTS towers for outages

Telco

Contribution to ind’l rev’n 1H18

27%(drop from 65% in 2016)

73%

Revenue 1H18 YoY Gr.

-25% +15%

Growth strategy & recent trends

Continued support of solar projects; focus on home systems and street lights

Maintain and grow market share in telco, expand traction (i.e. forklifts, tractors), maintain military client

Total indst’l

+0.2%YoY

softer due to drag from r.energy

23

Contribution from off-grid solar farms dropped from 65% to 27% as drag has largely bottomed-out; growth upside from other segments

• Budget cuts starting FY17; Jan-18 federal gov’t

fully halted new off-grid solar farms in favor of

roof panels1 (demand from regional gov’t and replacement still remains)

• Drag from this segment’s decline has largely bottomed-out

• Telco GDP grew 10% CAGR ’15-17; as sole local producer (vs. imports), Nipress is well

positioned to increase market share

• Spike in FY17 from large military orders of ~IDR80b Nov-Dec ’17; without these one-off big orders the segment still grew by 33% CAGR in ’15-17

R. Energy Segment Sales(IDR bn)

Telco+others Segment Sales(IDR bn)

245 248

8353 40

2015 2016 2017 1H17 1H18

97134

252

93 107

2015 2016 2017 1H17 1H18

1. Supported by statement from Dir. General of Energy (bisnis.tempo.co/read/1047167/pemerintah-hentikan-proyek-energi-bersih-apbn)

24

Agenda






Growth plan

25

646 658742

388 391

341 382335

146 146

9881.040 1.077

534 538

2015 2016 2017 1H17 1H18

Automotive Industrial

Revenues: Grew 4.4% CAGR ’15-17 and 0.7% YoY 1H17-18Potential for accelerated growth from NS and new export markets; reduced drag from r. energy

CAGR 15-17

YoY 1H17-18

+4.4%Total

Industrial

Auto

-1.0%

+7.1%

+0.7%

+0.2%

+0.9%

Nipress’ Total Revenues(IDR bn)

4.4% CAGR ’15-17 and +0.7% YoY 1H17-18 mostly caused by:• Drag from r. energy – largely bottomed-out• Exports rationalized to more profitable markets

Other sectors +21% CAGR ’15-17 and +26% YoY

Positioned for mid-long term accelerated growth:• NS brand: Strong growth of OEM;

replacement riding on its tail• Drag from r. energy bottoming out• Potential of new markets with JCI

R.energyTelco+others

-42%+61%

-25%+15%

OEMReplacementExports

+26%+5%+6%

+106%+17%-40%

26

183 179167

74

95

18,5%17,2%

15,5%

13,8%

17,7%

-1,0%

4,0%

9,0%

14,0%

19,0%

24,0%

0

50

100

150

200

250

300

2015 2016 2017 1H17 1H18

Gross profit (IDR bn) Gross profit margin

Gross profit: Shift towards more profitable business mixHistorical movement in margins mostly from changes in product portfolio

Nipress’ Gross Profit

1H17 margins were dragged down by low-margin Saudi exports; compression slightly

offset by high-margin industrial orders in 2H17

Exit from Saudi and shift towards higher-

margin segments1H17 margins were dragged down by low-margin Saudi exports; compression slightly

offset by high-margin industrial orders in 2H17

27

Profit trends: EBITDA margins moves inline with GP margins from ’16Deleveraging from 1.0x DER in Dec-15 to 0.6x DER in Jun-18

139 155 13760 79

14,1% 14,9% 12,7% 11,2%14,7%

-5%

5%

15%

0

100

200

300

2015 2016 2017 1H17 1H18

Absolute value (IDRb) Profit margin

3166 44 20 22

3,1%6,3%

4,1% 3,8% 4,1%

-5%

5%

15%

0

100

200

300

2015 2016 2017 1H17 1H18

51 54 4919 33

5,2% 5,2% 4,6% 3,6%6,1%

-5%

5%

15%

0

100

200

300

2015 2016 2017 1H17 1H18

EBITDA

PAT (norm. for FX)

PAT

Opex in ’15 high as % of revenues as new factory came online; margin moves in line with GP starting ‘16

Capital structure is deleveraged from 1.0x DER in 2015 to 0.7x in 2016-17

Some FX exposure comes from Nipress’ USD loans

28

OEM Replacement Exports

Pass-through mechanism for Lead

Pricing formula with lead price + FX

component

All players exposed to the same market

dynamicsMarket leader adjusts

pricing inline with lead/FX

Pricing formula with lead price + FX

componentPricing by-project

with repricing clause for signif.

commodity movements

Pass-through mechanism for USD

n/aExports are

transacted in USD

Volatility in raw material prices and FX can largely be passed throughLead, a global commodity traded in USD, is a key material comprising 50%-60% of COGS

Automotive Industrial

29

Agenda






Growth plan

30

On 4Q18, JCI completed the acquisition of a 24.5% stake in NEO

Transaction with a mix of secondary and primary shares

NEO’s EV was agreed at a value that is higher than Nipress’ current trading EV

PT Nipress Energi Otomotif(NEO)

Industrial business; automotive fully carved

out to NEO

24.5%

75.5%

1. Proceeds paid in USD

36% primary, 64% secondary

983 1.140

7,2x

18,5x

-1,01,03,05,07,09,011,013,015,017,019,0

0,000

500,000

1.000,000

1.500,000

2.000,000

2.500,000

3.000,000

3.500,000

4.000,000

Nipress EV as ofclosing 11-Oct-18

NEO's EVfrom JCI tx

Enterprise value (IDRb) EV / EBITDA FY17

Deal proceeds of USD18m1 are paid in USD and will be used for capex and general corporate

purposes

Higher EV despite auto business only contributing ~70% and ~50% Nipress’ revenues

and EBIT, respectively

31

About JCI: Global market leader in automotive batteries with minimum presence in SEA

HQ in Ireland, listed on NYSE, present in over 150 countries, with >100 years of experience in the automotive batteries

JCI, 1st place:

USD7.4bauto battery sales FY17

GS-Yuasa, 2nd place

USD2.5bauto battery sales FY17

Market-leading profitability from proprietary closed-loop

manufacturing, distribution and recycling system

Global leader in batteries by a wide margin,

powering 1 of 3 cars in the world

Relationship with notable OEMs around

the globe

~20% EBITDA margins

(vs. Nipress’ 15%)

32

JCI has a track record of successes in emerging markets through JV and organic growth

JV with Amara Raja in 1997, pioneered MF batteries in India;

consistent market share gains

vs. Exide, a dominant leader, to become the close 2nd

today

India: JV with Amara Raja

Brought the notable European brand to China in 2006 and has carved a sizeable

market share

China: Building VARTA

JV with IMSA in 1998, full ownership in 2004; now the

most recognized in Mexico and South America

Mexico: Inorganic growth

33

Amara Raja: JV with JCI has been clawing market share from a dominant player in India

Amara Raja vs Exide’s Revenue Growth(% YoY)

Consistently growing faster than Exide,

market share grew to 22%Introduce warrantied MFbatteries with JCI

Exide was a dominant player with 85% market share

8% 10%

34%

54%64%

82%

21%

12%20%

34%25%

16%23%

11% 15% 13%

4% 7%

26%17%

34%

49%

15%

17%

32%

12%21%

-1%

13%

-1%

17% 15%

FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Amara Raja Exide

2001

By 2003, Amara Raja holds 6%

market share while Exide’s share

remains stagnant

Though Exide also gains market share from small players,

now a close 2nd with 35% market share

(Exide at 40%)

Today Amara Raja trading at 14x TTM EBITDA while

Exide at 8x

34

Deal rationale: Nipress as platform to break into ASEAN and 2W

• Opening new markets

• Despite its scale, JCI has minimum presence in SEA’s 4W and global 2W battery space

• JCI’s global network + Nipress’ local knowledge = well positioned to enter new markets

• Product and technology sharing

• High-durability batteries in partnership with JCI, enabled Nipress to become the first to provide official warranty for lead-acid batteries

Best business practice (BBP) sharing

1

2

3

• World-class manufacturing, distribution, and warranty management practices

35

Agenda






Growth plan

36

Expand domestic market share and penetrate new markets with JCI

Indonesia is exclusive to Nipress, all JCI operations in

Indo will be though Nipress

Leverage JCI’s best practice learned from other

markets + Nipress local knowledge

Domestic market International 2W market

Sizeable opportunity in these markets:

• ASEAN car population estimated to be 3x Indonesia

• Global motorcycle population at least 6x Indonesia; at

least a quarter of which in ASEAN

Nipress to be used as platform to for JCI to join ASEAN tariff-free zone; potential to be a regional manufacturing hub

In 2H18, JCI assistance has already opened new clients in Malaysia, doubling orders from the region

ASEAN 4W market

37

Auto sales volume expected to reach 2.4x by 2021

Target for 4W Target for 2W

2021

2.7mnbatteries

2017

1.5mn batteries

2021

5.0mn batteries

2017

1.8mn batteries

+30%CAGR

+16%CAGR

Key growth drivers:

• Recovery of auto market• Increased market share of NS OEM, which will contribute to NS replacement market

• Additional gains from high durability NS replacements + ramp-up of best practice distribution

• New markets opened in collaboration with JCI

Appendix

39

Selected P&L and Balance Sheet Items

In IDR bn FY15 FY16 FY1714-17 CAGR

1H17 1H1817-18YoY

Income statementRevenue 987.9 1,039.6 1,077.0 2.9% 533.7 537.5 0.7%% YoY -2.8% 5.2% 3.6% 0.7%Gross profits 182.7 178.6 167.4 -2.9% 73.7 94.9 28.7%% margin 18.5% 17.2% 15.5% 13.8% 17.7%EBITDA 138.9 154.5 136.7 -0.5% 59.6 79.0 32.5%% margin 14.1% 14.9% 12.7% 11.2% 14.7%EBIT 83.7 134.1 108.5 9.1% 49.9 54.1 8.3%% margin 8.5% 12.9% 10.1% 9.4% 10.1%PAT 30.7 65.7 44.1 12.9% 20.3 22.2 9.4%% margin 3.1% 6.3% 4.1% 3.8% 4.1%Norm. PAT (ex forex) 51.4 53.6 49.2 -1.5% 19.3 32.8 69.6%% margin 5.2% 5.2% 4.6% 3.6% 6.1%Balance sheetTotal asset 1,548 1,778 1,898 7.0% 1,804 1,882 4.4%Debt (interest bearing) 634 595 584 -2.7% 553 541 -2.3%Total equity 609 843 880 13.0% 862 902 4.6%Key ratiosROE 5.1% 9.0% 5.1% 4.8% 5.0%Debt/ Equity 104% 71% 66% 64% 60%Debt/ EBITDA 4.6 3.9 4.3 9.3 6.8Working capital days 127.9 121.2 116.5 92.6 91.0

DSO 119.0 111.2 111.1 113.0 112.2DIO 106.7 103.1 102.3 98.8 102.7DPO -97.8 -93.0 -96.9 -119.2 -123.9

Note: Full year ending 31-Dec

Documents

PT Nipress Tbk (IDX:NIPS)nipress.com/wp-content/uploads/2018/10/Nipress... · Introduction to PT Nipress Tbk Established in 1970, Nipress is currently listed in IDX with a market