-
l Equity Research l
Important disclosures can be found in the Disclosures Appendix
All rights reserved. Standard Chartered Bank 2014
http://research.standardchartered.com
Indonesia l Emerging Companies 5 March 2014
Sido Muncul NOT RATED
NON-COVERED COMPANY VISIT NOTE
Standard Chartered Equity Research does not cover this company
and nothing herein should be interpreted to be a recommendation
or price target with respect to the company.
PRICE as at 4 March 2014 IDR 885.00
Key points
Sido Muncul is the market leader in Indonesias traditional
herbal medicines market. Capricorn Indonesia Consult estimates that
the companys Tolak Angin brand had a 75% market share by sales in
the herbal cold remedy segment in 2012.
The company is also the leading producer of a powdered energy
drink, under the Kuku Bima brand, with a 43% market share by sales
in 2012, according to IMS.
Sido Munculs revenue grew at a CAGR of 13% over 2010-12.
Management is aiming to maintain revenue growth at 15-16% p.a. over
next three years and is planning to deepen the penetration of its
products in modern trade.
Bloomberg code: SIDO IJ PER, historical (x) 34.6
Mkt cap (USD mn) 1,158 Yield, historical (%) 4.2
12m range (IDR) 580-895 PBR, historical (x) 10.3
3m value traded (USD mn) NM ROE (%) 30
No. of shares (m) 15,000 Net gearing (%) -9
Est. free float (%) 19% Net debt (cash) (IDR bn) (112)
Established 1975 Historical EPS (IDR) 26
Listed 2013 EPS 3-year CAGR (%) NA
Secondary placement NA EPS 7-year CAGR (%) NA
Auditors, since BDO Historical DPS (IDR) 37
Year-end Dec DPS 3-year CAGR (%) NA
Major shareholder Hidayat family 81%
Source: Annual report
What Sido Muncul does (and why)
Sido Muncul is the leading player in traditional herbal
medicine
(Jamu) in Indonesia, best known for its Tolak Angin brand of
herbal remedy for cold. Capricorn estimates that the company
had
a 75% market share in the herbal cold remedy segment in
2012.
The company is also the market leader in powdered energy
drinks
with a 43% market share by sales in 2012, according to IMS.
Why we visited Sido Muncul
Sido Muncul plans to more than double the monthly production
capacity of Tolak Angin to 150mn sachets in 2016 from 70mn
sachets in 2013. Management is also planning to triple the
contribution of modern trade to c.15% of revenue in 2016,
from
c.5% in 2012. The company was recently listed on the
Indonesia
Stock Exchange in December 2013. It is the first herbal
medicine
producer to be listed in Indonesia.
Valuations and share price performance
Sido Muncul shares rose 53% since their listing in December
2013, outperforming the Indonesia pharmaceutical sector and
the
JCI index, which rose 10% and 19% during the same period.
The
stock has traded at a historical PER of 34.4x, compared with
32.5x
for its peers in the Indonesian consumer health sector.
Currently,
the street is not covering the stock.
Read-across to other companies
Within the regional herbal medicines sector, Eu Yan Sang
trades
at a lower 2012 PER of 21x than Sido Munculs 34x. Eu Yan is
the
leading herbal medicine player in ASEAN and Hong Kong.
Share price performance (Bt)
Source: FactSet
Revenue breakdown by segment
Source: Company
650700750800850900950
Dec-13 Mar-14
Sido Muncul JAKARTA COMPOSITE INDEX (Rebased)
1,202 1,339 1,265
483 587 784
140
231 265
0
500
1,000
1,500
2,000
2,500
3,000
2010 2011 2012
IDR
bn
Energy drink Herbal medicine Candy & drinks
Health drinks Others
Alvin Witirto
[email protected]
+65 6596 8530
Stephen Hui [email protected]
+65 6596 8514
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Equity Research l Sido Muncul
5 March 2014 2
Analyst visit note Background. Sido Muncul began producing
traditional herbal
remedies in 1940. It was established by Mrs. Rahkmat
Sulistio
as a home industry. The Hidayat family remains the
controlling shareholder of the company with a combined
ownership interest of 81%. The largest shareholder is Desy
Sulistio Hidayat (40%), the matriarch of the Hidayat family,
followed by her children, Irwan Hidayat, Sofyan Hidayat,
Johan Hidayat, David Hidayat and Sandra Linata Hidayat with
8.1% ownership stakes each.
Industry overview. During 2008-12, Indonesians herbal
medicine consumption grew at a CAGR of 34% by volume
and 16% by sales, according to Capricorns estimates.
Euromonitor estimates that the herbal medicines sales could
grow at a CAGR of 10% to USD 800mn in 2017 from USD
500mn in 2012.
Business segments. The company has 200 products across
five categories herbal medicines, energy drinks, health
drinks, candies and supplements. The herbal medicines and
energy drinks categories accounted for c.84% of revenue in
2012.
Distribution. Sido Muncul distributes its products through
160,000 wholesalers covering 76 cities in Indonesia.
Management believes that the eastern Indonesian market still
has a significant potential from a distribution standpoint.
Herbal medicines (33% of 2012 revenue; 56% of gross
profit)
Sido Munculs flagship product in this segment is Tolak
Angin, which accounts for 85% of this segments revenue.
This segment is the companys most-profitable business,
given its 65% gross profit margin, compared with the
consolidated businesss gross profit margin of 38%.
Tolak Angin is a household name in Indonesia. It was
frequently featured as a top brand in the herbal medicines
segment by Frontier Consulting Group, Markeeters and
MarkPlus Insight during 2011-12.
Management sees this segment as Sido Munculs growth
driver over the next few years. It expects revenue from this
segment to increase by 20% p.a. in the next three years.
Energy drinks (53% of revenue, 35% of gross profit)
The companys flagship brand within this segment is its
Kuku Bima energy drink, which is targeted at the low
income segment. Management said the products
positioning is also reflected in the greater reliance on the
traditional trade channel in distributing this product.
Although this segment was the largest contributor of
revenue in 2012 with 43%, it contributed only 35% of gross
profit, given its low gross profit margin of 25%. This is
partly
due to lower price points of the products in this segment.
Management expects the segments revenue growth to be
flat in 2014, until it introduces ready-to-drink products
that
are gaining popularity in the market.
Candies & drinks (11% of revenue, 5% of gross profit)
Sido Muncul produces instant functional coffee products,
such as ginseng coffee and ginger coffee, under the Kuku
Bima and Sido Muncul brands, respectively.
The segment, which also includes candy products, carries
a 16% gross profit margin. Management expects revenue
from this segment to increase by 10-15% p.a. in the next
three years.
Health drinks & others (3% of revenue, 5% of gross
profit)
The segment caters to Sido Munculs portfolio of instant
herbal drink products, which are largely sold in powdered
sachets. Several key brands under this segment are Jahe
Wangi, Alang Sari, Kunyit Asama and Beras Kencur. These
products are targeted largely at the mid-segment.
The segment has second highest gross profit margin at
57%. Management expects this segment to deliver revenue
growth of 20-25% p.a. in the next three years.
The segment also includes around 50 SKU of herbal
supplement products. Management said these products are
sold through drug store chains, and are targeted at the mid-
to-upper segment.
Strong growth outlook. Management expects to maintain
Sido Munculs revenue growth at 15-16% p.a. over 2014-15,
driven by volume growth in the herbal medicines segment and
improved growth performance of its energy drink segment. It
believes that higher penetration into the modern trade
channel, which accounted for only c.5% of total revenue in
2012, will also sustain the double-digit revenue growth.
Management said it aims for the earnings growth to be at
least in line with revenue growth over the same period.
Exposure to imported raw materials. Sido Munculs herbal
medicine products largely rely on locally sourced raw
material,
and only 10-15% of COGS is attributable to imported raw
material. However, its energy drink business is much more
dependent on imported raw materials, which account for
c.90% of COGS. Management said this is partly the reason
for its lower gross profit margin.
Expansion plan and capex. Management said it has set a
capex budget of IDR 219bn for 2014 and IDR 137bn for 2015.
It is planning to double the production capacity for the
flagship
product, Tolak Angin, to 140-150mn sachets per month in
2016. Management estimates its 10-hectare factory to cost
IDR 196bn. In addition, it also plans to expand its herb
extraction plant and warehouse facilities.
Net cash position. Sido Muncul had a net cash of IDR 112bn
in 2012. Management expects the company to remain in net
cash position in 2014, as its capex could be fully funded
with
the IPO proceeds.
Dividend policy. Sido Muncul maintains a dividend policy of
distributing at least 20% of net profit.
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Equity Research l Sido Muncul
5 March 2014 3
Valuation Figure 1: Peer comparison
Price
Target Price Market
cap
3M avg value
traded Last PER (x) 2 year
EPS PEG Price / sales EV/EBITDA
Div. Yield
(%) ROCE
(%)
Name Ticker Rating (LCY) (LCY) (USD
mn) (USD
mn) FYE FY0 FY1 FY2 CAGR 2 years FY0 FY0 FY1 FY2 FY1 FY1
Sido Muncul SIDO IJ NR 890 1,151 - 12/12 34.4 NA NA NA NA 4.5
24.4 NA NA NA NA
Pharmaceutical & consumer health
Kalbe Farma KLBF IJ NR 1,430 5,780 7.5 12/12 38.6 34.6 29.2 15%
1.9 4.0 27.1 23.3 19.6 1.4 27.5
Tempo Scan TSPC IJ NR 3,345 1,298 0.2 12/12 24.0 21.8 16.7 20%
0.9 1.8 16.7 13.6 10.6 2.7 20.4
Kimia Farma KAEF IJ NR 735 352 0.3 12/13 19.9 NA NA NA NA 0.8
12.8 NA NA NA 14.9
Average
27.5 28.2 23.0 17% 1.4 2.2 18.9 18.4 15.1 2.0 20.9
Herbal medicine
Eu Yan Sang EYSAN SP OP 1.03 0.85 294 0.2 06/13 20.7 17.3 15.6
15% 1.0 1.1 15.0 9.8 8.7 3.1 12.3
Hai-O HAIO MK NR 2.47 148 0.1 04/13 10.4 10.7 9.7 3% 2.9 1.7 6.0
5.8 5.4 5.1 20.4
Power Root PWRT MK NR 1.88 173 0.2 02/13 35.6 17.1 NA NA NA 1.9
19.5 11.8 NA 3.2 18.3
Beijing Tong Ren Tang 8138 HK NR 11.42 1,221 2.3 12/12 29.3 43.1
26.0 6% 4.2 26.4 61.5 34.7 15.6 0.0 32.4
Average
24.0 22.1 17.1 8% 2.7 7.8 25.5 15.5 9.9 2.9 20.9
Note: Share prices as of 4 March 2013; Bloomberg estimates for
NR stocks
Source: Bloomberg, Standard Chartered Research estimates
Key charts Figure 2: Traditional herbal medicine sales and
volume Figure 3: Market share breakdown
Source: Capricorn Indonesia Consult Source: Capricorn Indonesia
Consult, IMS ITMA
Figure 4: Revenue and gross profit breakdown 2012 Figure 5:
Gross profit margin 2012
Source: Company Source: Company
7.2
8.5 9.2
10.2
13
0
5
10
15
20
25
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012
Vo
lum
e (mn
kg)
MA
rket
siz
e (I
DR
tn)
Market size Volume (RHS)
75%
43%
25%
57%
0%
20%
40%
60%
80%
100%
Traditional herbal medicine Energy drink
% m
arke
t sh
are
by
sale
s
Sido Muncul Others
1,265
321
784 513
265 41
0%
20%
40%
60%
80%
100%
Revenue (IDR bn) Gross profit (IDR bn)
% T
ota
l
Energy drink Herbal medicine Candy & drinks Health drinks
Others
65%
57%
25%
16%
0%
10%
20%
30%
40%
50%
60%
70%
Herbal medicine Health drinks Energy drink Candy &
drinks
% g
ross
pro
fit m
arg
in
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Equity Research l Sido Muncul
5 March 2014 4
Trend analysis and three-year financial data Growth Sales growth
& earnings growth
Margins EBIT margin & sales growth
Cash flow Op Cash Flow Generated & Capex
Balance sheet Net debt (cash) / equity
Returns ROE & ROCE
Income statement (IDR bn) Year end: Dec 2010 2011 2012
Sales revenue 1,867 2,198 2,392
Gross profit 686 878 921
EBITDA 360 468 542
Depreciation & amortisation (24) (29) (38)
EBIT 335 439 504
Net interest (expense) / income 3 11 5
Others 1 5 4
Income tax (102) (115) (126)
PAT 237 340 388
Minorities (0) (0) (0)
Net income 237 340 388
Cash flow (IDR bn)
Year end: Dec 2010 2011 2012
Operating profit 335 439 504
Depreciation & amortisation (24) (29) (38)
Working capital (98) (18) (45)
Others (1,068) (65) (442)
Operational cash flow (855) 327 (20)
Tax paid (68) (143) 4
After-tax operational cash flow (923) 183 (16)
Capex (96) (111) (181)
Net interest (4) (1) (1)
Debt 10 19 43
Dividends (97) (160) (651)
Others 1,258 (87) 1,095
Net flow 149 (156) 289
Balance sheet (IDR bn)
Year end: Dec 2010 2011 2012
Tangible assets 217 307 442
Other LT assets 0 0 0
Stocks 57 326 802
Debtors 172 206 236
Cash and liquid assets 167 208 261
Other ST assets 277 122 411
Total Assets 890 1,169 2,151
Current creditors 99 155 193
Current borrowings 1 1 299
Long-term borrowings 236 253 0
Others 209 224 355
Total liabilities 544 633 846
Shareholders funds 346 535 1,305
Minority interests 0 0 0
Equity 346 535 1,305
Total capital employed 890 1,169 2,151
Key data & ratio
Year end: Dec 2010 2011 2012
EPS (IDR) 16 23 26
Chg % NA. 43% 14%
DPS (IDR) 37 11 37
CFPS (IDR) (68) 5 (13)
BVPS (IDR) 23 36 87
Wtd avg shares (m) 15,000 15,000 15,000
ROE (%) 68% 63% 30%
Post-tax ROCE (%) 41% 43% 24%
Capex/sales (%) -5% -5% -8%
Capex/depreciation (%) -395% -380% -481%
Net debt/equity (%) -12% 25% -9%
Total debt/Total capital (%) 41% 32% 19%
Net interest cover (x) (120.6) (41.4) (97.0)
Source: Bloomberg
Source: Company, Bloomberg
0%
10%
20%
30%
40%
50%
2011 2012
Sales growth Adj. Earnings growth
10%
12%
14%
16%
18%
20%
22%
2010 2011 2012
EBIT margin Net profit margin
-1,000
-800
-600
-400
-200
0
200
400
2010 2011 2012
IDR bn After-tax operational cash flow
Capex
-20%
0%
20%
40%
60%
2009 2010 2011 2012
Net debt/equity (%)
10%
30%
50%
70%
90%
2010 2011 2012
ROE Post-tax ROCE
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Equity Research l Sido Muncul
5 March 2014 5
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Equity Research l Sido Muncul
5 March 2014 6
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