Equity Research

Company Update

Tuesday,11 May 2021

SELL Kino Indonesia (KINO IJ)

Maintain Facing a challenging period
Last price (IDR) 2,370 KINO reported lower 1Q21 earnings on the back of negative top line growth
Target Price (IDR) 2,100 with high interest expenses. While we expect improved quarterly
performance going forward, the risk of earnings volatility remains. The
Upside/Downside -11%
beverages division may continue to record strong performance, driven by
Previous Target Price (IDR) 2,500 sales made during the fasting period. However, sales of Personal Care items
may still face challenges. At the current share price, the stock is trading at an
Stock Statistics
unattractive valuation of FY21F PE of 25x. Maintain SELL.
Sector CONSUMER
Bloomberg Ticker KINO IJ A sluggish top line and interest expenses put pressure on 1Q21 earnings. Kino
No of Shrs (mn) 1,429 reported a 1Q21 top line of IDR964bn, down 13% yoy. In 1Q21, all segments
posted negative revenues growth except food (+10% yoy). The company
Mkt. Cap (IDRbn/USDmn) 3,386/238
maintained a 1Q21 gross margin of 48.4% thanks to continued high margins in
Avg. daily T/O (IDRbn/USDmn) 2.0/0.1 the Personal Care and Food divisions. On the operating front, KINO was able to
make opex efficiencies, with the 1Q21 operating profits reaching IDR46bn.
Major shareholders (%)
Below the operating line, IDR42bn of interest expenses squeezed the pretax
PT KINO INVESTINDO 70.0 income to IDR15bn. KINO reported IDR2bn of tax benefits and net profits of
Harry Sanusi (President Director) 12.6 IDR16bn in 1Q21 (-72% yoy). The 1Q21 net profits are only 8% of our previous
Estimated free float 6.2 forecast and consensus estimates, i.e. below.
EPS Consensus (IDR) FY21 earnings revised down on higher costs. The expectation of improved
2021F 2022F 2023F economic conditions in subsequent quarters should help KINO to book FY21 top
Danareksa 94.6 120.0 123.1 line growth of 6.1% yoy. In 2Q21 and during the dry season, sales of KINO’s
Consensus 146.9 182.8 na
beverages (Kaki Tiga and Panda) should enjoy stronger demand due to their
perceived health benefits. However, we also see that the company’s personal
Danareksa/Cons (35.6) (34.4) na
care products will face challenges in the coming quarters. Nonetheless, we
KINO relative to JCI Index estimate 5% yoy growth supported by steady demand for hand wash and
sanitizer products. On a cautionary note, higher raw material prices (especially
of sugar and CPO) pose a threat to gross margins (we estimate a lower gross
margin of 47.4%). We also expect continued efficiencies in opex. In spite of
higher interest expenses from higher gearing, we estimate FY21 net profits of
IDR135bn, +19% yoy (this is a downward revision by 31.6%).

Maintain SELL. At the current share price, KINO is trading at FY21 PE of 25x, not
attractive compared to its peers. Amid difficult times, the activity ratios have
worsened, leading to a cash cycle of 164days in 1Q21 (89-100 days in 2017-19).
Additionally, we see that sales of personal care items may lag behind the
recovery curve as many consumers will focus their spending on staples
including food items and beverages. As such, we see more challenges ahead for
KINO. In our DCF valuation which assumes a WACC of 7.7% and TG of 4.5%, we
Source : Bloomberg arrive at a lower TP of IDR2,100. SELL maintained.
Key Financials
Year to 31 Dec 2019A 2020A 2021F 2022F 2023F
Revenue (IDRbn) 4,679 4,025 4,270 4,608 4,969
EBITDA (IDRbn) 508 306 459 526 566
EBITDA Growth (%) 76.3 (39.8) 49.8 14.8 7.5
Net profit (IDRbn) 520 114 135 171 176
EPS (IDR) 364.3 79.5 94.6 120.0 123.1
EPS growth (%) 246.8 (78.2) 19.0 26.8 2.6
BVPS (IDR) 1,831.5 1,755.2 1,845.0 1,946.5 2,046.0
x Natalia Sutanto DPS (IDR) 57.0 83.0 15.9 18.9 24.0
(62-21) 5091 4100 ext. 3508 PER (x) 6.5 29.8 25.0 19.7 19.3
natalia.sutanto@danareksa.co.id PBV (x) 1.3 1.4 1.3 1.2 1.2
Dividend yield (%) 2.4 3.5 0.7 0.8 1.0
EV/EBITDA (x) 8.3 16.5 11.3 10.1 9.6
Source : KINO, BRI Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 1
 Exhibit 1. Revenues and Growth Exhibit 2. Net Profits and Growth

Revenue - IDR bn Sales growth (RHS) Net profit - IDR bn Net profit growth (RHS)

5.000 40,0 600 300,0

4.000 30,0 500
20,0 200,0
3.000 400
10,0
2.000 300 100,0
-
1.000 200
(10,0) -
- (20,0) 100
2018 2019 2020 2021F 2022F 0 (100,0)
2018 2019 2020 2021F 2022F

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 3. Margins Exhibit 4. Gearing Level

Gross margin Operating margin Net margin Net Debt/Equity Ebitda coverage (RHS)

60,0 0,8 7,0

50,0 6,0
0,6 5,0
40,0
4,0
30,0 0,4
3,0
20,0
0,2 2,0
10,0 1,0
- - -
2018 2019 2020 2021F 2022F 2018 2019 2020 2021F 2022F

Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates

Exhibit 5. 1Q21 Earnings

KINO 1Q20 4Q20 1Q21 yoy qoq 2021F A/F, %
Revenue, IDRbn 1,113 914 964 -13.4% 5.5% 4,270 23%
COGS 557 502 498 -10.7% -0.8% 2,244
Gross profit 556 413 467 -16.0% 13.1% 2,025 23%
Opex 463 464 421 -9.2% -9.2% 1,671
Operating profit 92 (51) 46 -50.3% na 355 13%
Pretax profit 75 (60) 15 -80.3% na 173
Net profit 58 (46) 16 -71.6% na 135 12%

Gross margin 49.9% 45.1% 48.4% 47.4%

Opext to revenue 41.6% 50.7% 43.6% 39.1%
Operating margin 8.3% -5.6% 4.8% 8.3%
Pretax margin 6.8% -6.5% 1.5% 4.1%
Net margin 5.2% -5.1% 1.7% 3.2%
Inventory days 115 141 134 120
Receivable days 93 124 122 130
Payable days 89 86 91 83
Source: Company, Danareksa Sekuritas estimates

www.danareksa.com See important disclosure at the back of this report 2

 Exhibit 6. Earnings revision
Previous New Changes
2021F 2022F 2021F 2022F 2021 2022
Revenue 3,928 4,246 4,270 4,608 8.7% 8.5%
Gross profit 1,855 2,007 2,025 2,212 9.2% 10.2%
Operating profit 383 424 355 404 -7.4% -4.7%
Net profit 198 227 135 171 -31.6% -24.3%
Gross margin 47.2% 47.3% 47.4% 48.0%
Operating margin 9.8% 10.0% 8.3% 8.8%
Net margin 5.0% 5.3% 3.2% 3.7%
Source: BRI Danareksa Sekuritas estimates

Exhibit 7. Revenues growth by division and changes in our key assumptions

Previous New
2021F 2022F 2021F 2022F
PC -7% 7% 5% 7%
Beverages -4% 9% 8% 8%
Food 4% 6% 6% 8%
Pharma 24% 36% 18% 37%

Key Assumption
ASP growth 2.2% 0.7% 1.4% 0.7%
Volume -6.3% 6.8% 6.2% 6.8%
Source: BRI Danareksa Sekuritas estimates

www.danareksa.com See important disclosure at the back of this report 3

 Exhibit 8. Income Statement
Year to 31 Dec (IDRbn) 2019A 2020A 2021F 2022F 2023F
Revenue 4,679 4,025 4,270 4,608 4,969
COGS (2,488) (2,096) (2,244) (2,396) (2,586)
Gross profit 2,191 1,929 2,025 2,212 2,383
EBITDA 508 306 459 526 566
Oper. profit 433 210 355 404 424
Interest income 13 5 5 5 6
Interest expense (83) (138) (181) (183) (197)
Forex Gain/(Loss) 0 5 - - -
Income From Assoc. Co’s (2) - - - -
Other Income (Expenses) 276 54 (5) (6) (7)
Pre-tax profit 636 135 173 220 226
Income tax (120) (21) (38) (48) (50)
Minority interest 5 (0) (0) (0) (0)
Net profit 520 114 135 171 176
Core Net Profit 256 109 135 171 176

Exhibit 9. Balance Sheet

Year to 31 Dec (IDRbn) 2019A 2020A 2021F 2022F 2023F
Cash & cash equivalent 268 184 252 234 295
Receivables 1,425 1,574 1,637 1,766 1,904
Inventory 557 690 623 799 862
Other Curr. Asset 85 114 313 338 364
Fixed assets - Net 2,160 2,341 2,453 2,479 2,546
Other non-curr.asset 201 352 372 399 428
Total asset 4,696 5,255 5,649 6,015 6,400

ST Debt 955 1,487 1,127 1,214 1,307

Payables 565 478 555 592 639
Other Curr. Liabilities 213 181 192 207 223
Long Term Debt 146 374 902 970 1,042
Other LT. Liabilities 114 158 168 181 195
Total Liabilities 1,993 2,678 2,944 3,165 3,407
Shareholder'sFunds 2,616 2,507 2,636 2,781 2,923
Minority interests 86 70 70 70 70
Total Equity & Liabilities 4,696 5,255 5,649 6,015 6,400

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 Exhibit 10. Cash Flow
Year to 31 Dec (IDRbn) 2019A 2020A 2021F 2022F 2023F
Net income 520 114 135 171 176
Depreciation and Amort. 76 96 104 122 142
Change in Working Capital (399) (383) 82 (266) (152)
OtherOper. Cash Flow 58 86 (13) 167 179
Operating Cash Flow 256 (87) 308 195 345

Capex (914) (226) (208) (148) (209)

Others Inv. Cash Flow 143 (147) (14) (22) (23)
Investing Cash Flow (771) (373) (222) (171) (231)

Net change in debt 509 760 168 155 165

New Capital 84 (3) - - -
Dividend payment (81) (119) (23) (27) (34)
Other Fin. Cash Flow (83) (138) (181) (183) (197)
Financing Cash Flow 428 501 (36) (55) (67)

Net Change in Cash (88) 41 50 (31) 47

Cash - begin of the year 240 268 184 252 234
Cash - end of the year 268 184 252 234 295

Exhibit 11. Key Ratios

Year to 31 Dec 2019A 2020A 2021F 2022F 2023F
Growth (%)
Sales 29.5 (14.0) 6.1 7.9 7.8
EBITDA 76.3 (39.8) 49.8 14.8 7.5
Operating profit 77.6 (51.5) 69.1 13.9 4.8
Net profit 246.8 (78.2) 19.0 26.8 2.6
Profitability (%)
Gross margin 46.8 47.9 47.4 48.0 48.0
EBITDA margin 10.9 7.6 10.7 11.4 11.4
Operating margin 9.2 5.2 8.3 8.8 8.5
Net margin 11.1 2.8 3.2 3.7 3.5
ROAA 12.6 2.3 2.5 2.9 2.8
ROAE 21.8 4.4 5.3 6.3 6.2
Leverage
Net Gearing (x) 0.3 0.7 0.7 0.7 0.7
Interest Coverage (x) 5.2 1.5 2.0 2.2 2.1

Source : KINO, BRI Danareksa Estimates

www.danareksa.com See important disclosure at the back of this report 5