PT WISMILAK INTI MAKMUR Tbk. (WIIM) - Full Year 2013
Bareksa • 04 Apr 2014
An employee walks past cigarette packets next to an information board (REUTERS)
Buana Capital maintain BUY with a TP of Rp 829 that implies 14F target P/E of 11.9x
Remarkable topline growth. The Company generates 4Q13 sales of Rp 395.3 bn (+2% QoQ, +5% YoY). FY13 revenue came in strong at Rp 1.59 tn (+42% YoY) and it forms 100% of our forecast and 102% of con-sensus. Topline growth was on the back of sales volume increases of SKM by +32.6% YoY, SKT by +68% YoY and a +14.8% YoY increase of SKM average selling price.
Improving Gross Margin. The 4Q13 Gross Profit is Rp 121.2 bn (-6% QoQ, +1% YoY) forming FY13 Gross profit of Rp 469.58 bn (+54% YoY). The improvement led to an increase in gross margin in FY13 to 30%, vs. 27% in FY12. This also pushes operating margin up as it was 10.3% in FY12 and it climbs to 11.3% in FY13.
Hike in Net Profit. The Company’s Net profit for 4Q13 is Rp 21.4 bn (- 32% QoQ, -39% YoY). That brings FY13 net profit to Rp 132.2 bn (+71% YoY). The result is in line with our estimates (99%) and is slightly above consensus (103%).
Possibility of Escalating Production Volume. The company produces two sorts of cigarettes: SKT and SKM. SKT is being produced at a 99% utilization rate whilst SKM (contributes 78% of revenue in FY13) is only produced at 55% of the total capacity. This presents us with a 45% hike potential in production volume of SKM where it is key for the Com-pany’s performance in the upcoming years.
Maintain BUY. WIIM trades at Rp 740, implies 10.6x 14F P/E. We maintain BUY with a TP of Rp 829 that implies 14F target P/E of 11.9x with ground of possible exponential increase in production volume for SKM cigarettes.
Currently the company produces two sorts of cigarettes: SKT (hand-processed) and SKM (machine-processed). SKT is being produced at a 99% utilization rate, producing approximately 480 mn sticks per annum. On the other hand, SKM is only produced at 55% of their total capacity as it produces slightly below 2 bn sticks per annum. SKM contributes 78% in FY13 to revenue. This implies that any increase in SKM volume produced would positively affect the Company’s topline. Thus going forward, a 45% hike potential in production volume with the absence of capital ex-penditure need is key for the Company’s performance.
The 4Q13 Gross Profit is Rp 121.2 bn (-6% QoQ, +1% YoY) forming FY13 Gross profit of Rp 469.58 bn (+54% YoY). The increase was mainly pushed by a +14.8% YoY increase of average selling price especially the SKM products and a strong SKM Regular sales volume performance (up by +32% YoY to 2.1 bn stick). For the Total Sales Vol-ume, both SKM and SKT combined, it was up by +36.9% YoY to 2.5 bn stick. That stated, WIIM’s customer loyalty is evident as increase in ASP did not negatively affect sales volume.
WIIM’s Cost of Goods Sold up by +37.3% and it was mainly driven by increase in Raw and Supporting Material used cost (+37.1% YoY). Despite the hike in COGS, gross margin was still able to improve as it is 30% in FY13, vs. 27% in FY12.
Operating expense up by 52% as it was due to the Company’s aggressive actions in promotions and advertising that sky rocketed (+246% YoY to Rp 81 bn, vs. Rp 23.4 bn in FY12). In 14F, we have a more positive view on opex as management plans to trim promotion and advertising expense.
The Company’s Net profit for 4Q13 is Rp 21.4 bn (-32% QoQ, -39% YoY). That brings FY13 net profit to Rp 132.2 bn (+71% YoY). The result is in line with our estimates as it forms 100% and is slightly above consensus forming 103%.
*Marolop A. Nainggolan and Andre Maningkas are PT Buana Capital's equity analyst. This article is part of the Equity Research of PT Buana Capital