[Indonesia] Poultry

Malindo Feedmill Hold

(MAIN IJ) (Downgrade)

3Q21F earnings preview: Anticipating weak 3Q TP: IDR860

outlook; Focus on 4Q Upside: 8.9%

Mirae Asset Sekuritas Indonesia

Emma A. Fauni emma.fauni@miraeasset.co.id

3Q21F earnings preview Near-term earnings risk

 We anticipate near-term earnings risk for MAIN in 3Q21 following weaker broiler and DOC prices in the
market during the quarter which is attributed to major mobility restrictions in Java and Bali starting early
of July.
 We won’t be surprised if MAIN books a net loss in the quarter considering MAIN’s higher earnings
volatility due to its comparatively lower market share, hence translating into lower economies of scale and
profitability margin.
 We project bottom line to come somewhere around –IDR25bn to –IDR30bn in 3Q21, driven by major
weakness in DOC segment coupled with further operating loss of broiler segment.

DOC to be the main dragger DOC to be the main dragger

 We expect DOC segment to be the biggest drag due to a 21% decline of average DOC price in the market
in 3Q21 (vs. 2Q21). DOC contributes 17% or becomes the second biggest contributor to consolidated
revenue. At operating level, DOC could contribute more or less depending on the ASP performance.
Hence, the impact of DOC price swing is more pronounced to MAIN compared to its peers.
 Broiler segment is expected to book negative operating level on the back of lower broiler price in the
market, which is again, understandable considering the weak demand during emergency PPKM
enforcement.
 Feed segment is likely to weaken further, but operating margin is expected to remain positive. Though
MAIN’s revenue exposure to feed sales is the highest compared to its peers, the company only managed
to book single-digit operating margin as MAIN’s feed business size is comparatively smaller.

Recommendation Anticipating weak 3Q outlook; Focusing on 4Q

 We’re lowering our earnings estimates ahead of earnings season for MAIN by 45.9% and 42.2% for 21F
and 22F, respectively. Our estimates are now 70% below consensus’ FY21 earnings estimates.
 We roll forward our valuation to 22F and lower down our TP for MAIN to IDR860/share due to lower
earnings estimates. We use P/E valuation method, and assign 11.0x P/E multiple. Currently MAIN is
trading at 22F P/E of 10.3x.
 However, we expect investors to also focus on MAIN’s recovery post the weak 3Q earnings momentum.
We think, 4Q could be the turning point for MAIN’s earnings should the outbreak in Indonesia remain
well-managed and the third wave scenario be unrealized.
Key data
(D-1yr=100)
JCI MAIN Share Price (10/26/21, IDR) 790 Market Cap (IDRbn) 1,768.6
180
170 Consensus NP (21F, IDRbn) 213 Shares Outstanding (mn) 2,238.8
NP Mirae Asset vs. consensus (21F, %) -70 Free Float (%) 42.4
160
150
140
EPS Growth (21F, %) n.m Beta (Adjusted, 24M) 1.4
130
120 P/E (21F, x) 12.5 52-Week Low (IDR) 540
110
100 Industry P/E (Current, x) 18.4 52-Week High (IDR) 965
90
10/20 12/20 2/21 4/21 6/21 8/21 10/21 Benchmark P/E (21F, x) 18.8

Share performance Earnings and valuation metrics

(%) 1M 6M 12M FY (IDRbn) 2017 2018 2019 2020 2021F 2022F
Absolute 1.3 -10.7 43.6 Revenue (IDRbn) 5,441 6,706 7,455 7,001 7,514 8,244
Relative -7.1 -22.2 14.2 Operating profit (IDRbn) 142 410 378 200 237 282
Net profit (IDRbn) 43 285 152 -39 141 173
EPS (IDR) 19 127 68 -17 63 77
BPS (IDR) 731 847 906 886 949 1,001
P/E (x) 41.1 6.2 11.6 -45.5 12.5 10.2
P/B (x) 1.1 0.9 0.9 0.9 0.8 0.8
EV/EBITDA (x) 9.8 5.2 5.9 7.8 6.3 5.6
ROA (%) 1.1 6.8 3.4 -0.8 2.9 3.4
ROE (%) 2.6 16.1 7.8 -1.9 6.9 7.9
Dividend yield (%) 4.8 0.0 4.8 0.0 0.0 3.2
Net gearing (x) 1.02 0.82 0.90 0.90 0.78 0.74
Note: Net profit refers to net profit attributable to controlling interests
Source: Company data, Mirae Asset Sekuritas Indonesia Research
Analysts who prepared this report are registered as research analysts in Indonesia but not in any other jurisdiction, including the US.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
October 27, 2021 Malindo Feedmill

Table 1. Change in our earnings estimates (IDRbn, %)

Old New Change (%)
2021F 2022F 2021F 2022F 2021F 2022F
Revenue 7,987 8,871 7,514 8,244 -5.9 -7.1
Growth (%, YoY) 14.1 11.1 7.3 9.7
Gross profit 960 1,061 770 867 -19.8 -18.3
Growth (%, YoY) 46.9 10.5 17.9 12.5
Operating profit 393 431 237 282 -39.7 -34.7
Growth (%, YoY) 96.3 9.7 18.3 18.9
Net profit 261 287 141 173 -45.9 -39.6
Growth (%, YoY) -772.6 9.7 -463.9 22.6
Source: Mirae Asset Sekuritas Indonesia Research

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October 27, 2021 Malindo Feedmill

Malindo Feedmill (MAIN IJ)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized)

(IDR bn) 12/19 12/20 12/21F 12/22F (IDR bn) 12/19 12/20 12/21F 12/22F
Revenue 7,455 7,001 7,514 8,244 Current assets
COGS -6,553 -6,347 -6,744 -7,377 Cash & equivalents 120 178 441 612
Gross profit 902 654 770 867 Receivables 442 403 393 431
Opex -524 -453 -533 -585 Inventories 874 886 887 970
Operating profit 378 200 237 282 Others 577 524 564 612
Other income / (expenses) 56 0 90 99 Total current assets 2,013 1,990 2,285 2,625
Finance income 0 0 1 2 Non-current assets
Finance cost -186 -181 -150 -165 Fixed assets - net 2,284 2,437 2,410 2,374
Profit before income tax 249 20 177 217 Others 352 237 237 237
Income tax expenses -96 -59 -36 -45 Total non-current assets 2,636 2,684 2,647 2,611
Minority interest 0 0 0 0 Total assets 4,649 4,674 4,931 5,236
Net profit 152 -39 141 173 Current liabilities
EBITDA 611 454 549 614 ST bank loans and CM 1,243 1,254 1,365 1,486
Account payables 246 224 203 222
Margin (%) 12/19 12/20 12/21F 12/22F Other current liabilities 215 182 276 299
Gross margin 12.1 9.3 10.3 10.5 Total current liabilities 1,704 1,660 1,844 2,007
Operating margin 5.1 2.9 3.2 3.4 Non-current liabilities
Net margin 2.0 -0.6 1.9 2.1 Long-term financial liabilities 706 707 742 780
EBITDA margin 8.2 6.5 7.3 7.5 Others non-current liabilities 127 162 162 162
Total non-current liabilities 833 869 904 941
Growth (%) 12/19 12/20 12/21F 12/22F Total liabilities 2,537 2,529 2,748 2,948
Revenue 11.2 -6.1 7.3 9.7 Shareholders' equity 2,030 1,986 2,127 2,244
Operating profit growth -7.8 -47.0 18.3 18.9 Minority interests -2 -2 -2 -2
EPS -46.5 -125.5 -463.9 22.6 Total liabilities and equity 4,649 4,674 4,931 5,236
EBITDA -4.2 -25.7 21.1 11.8

Cash Flows (Summarized) Forecasts/Valuations (Summarized)

(IDR bn) 12/19 12/20 12/21F 12/22F 12/19 12/20 12/21F 12/22F
Cash Flows from Op. Activities 166 240 496 379 P/E (x) 11.6 -45.5 12.5 10.2
Net profit 152 -39 141 173 P/B (x) 0.9 0.9 0.8 0.8
Depreciation 233 254 313 333 EV/EBITDA (x) 5.9 7.8 6.3 5.6
Change in Working Capital -96 18 26 -133 EPS (IDR) 68 -17 63 77
Others -123 8 16 6 BPS (IDR) 906 886 949 1001
Cash Flows from Inv. Activities -415 -302 -275 -297 DPS (IDR) 38 0 0 25
Capex -424 -407 -286 -297 Payout Ratio (%) 17.3 0.0 0.0 40.0
Others 9 104 10 0 Dividend Yield (%) 4.8 0.0 0.0 3.2
Cash Flows from Fin. Activties 226 119 42 89 Accounts Receivable Turnover (x) 18.9 16.6 19.0 20.1
Change in financial liabilities 236 90 42 146 Inventory Turnover (x) 7.8 7.2 7.6 7.9
Change in Equity 4 2 0 0 Accounts Payable Turnover (x) 25.9 27.0 31.6 34.7
Dividends paid -49 0 0 -57 ROA (%) 3.4 -0.8 2.9 3.4
Others 10 35 0 0 ROE (%) 7.8 -1.9 6.9 7.9
Increase (Decrease) in Cash -24 57 263 171 Current Ratio (%) 1.2 1.2 1.2 1.3
Beginning balance 144 120 178 441 Net gearing (x) 0.9 0.9 0.8 0.7
Ending balance 120 178 441 612 Interest Coverage Ratio (x) 2.3 1.1 2.2 2.3
Note: Net profit refers to net profit attributable to controlling interests
Source: Company data, Mirae Asset Sekuritas Indonesia Research estimates

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APPENDIX 1

Important Disclosures & Disclaimers

2-Year Rating and Target Price History
Company (Code) Date Rating Target Price (IDR) MAIN Analyst's TP
MAIN IJ 10/27/2021 Hold 860 1,700
6/30/2021 Buy 1,350
6/21/2021 Buy 1,060
1,200
4/22/2021 Trading Buy 1,060
4/15/2021 Buy 1,060
700
3/30/2021 Buy 930
3/22/2021 Trading Buy 930
12/11/2020 Buy 930 200
Oct-19 Oct-20 Oct-21
8/4/2020 Hold 550
8/3/2020 Under Review
7/29/2020 Hold 550
6/26/2020 Hold 540
5/14/2020 Hold 480
5/11/2020 Under Review
5/6/2020 Hold 510
4/30/2020 Under Review
4/24/2020 Hold 520
4/3/2020 Trading Buy 520
11/26/2019 Buy 1,260

Stock Ratings Industry Ratings

Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at PT Mirae Asset Sekuritas Indonesia, we may call a trading opportunity in case there is a technical or short-term
material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future
earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.

Disclosures
As of the publication date, PT Mirae Asset Sekuritas Indonesia and/or its affiliates do not have any special interest with the subject company and do not own 1% or
more of the subject company's shares outstanding.

Analyst Certification
Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of th e Analysts primarily
responsible for this report. Except as otherwise specified herein, the Analysts have not received any compensa tion or any other benefits from the subject
companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensati on of the Analysts was,
is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of PT Mirae Asset
Sekuritas Indonesia, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenue s from, among other business
units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of th is report, the Analysts do
not know or have reason to know of any actual, material conflict of interest of the Analyst or PT Mirae Asset Sekuritas Indonesia except as otherwise stated
herein.

Disclaimers
This report is published by PT Mirae Asset Sekuritas Indonesia (“Mirae Asset”), a broker-dealer registered in the Republic of Indonesia and a member of the
Indonesia Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such
information has not been independently verified and Mirae Asset makes no guarantee, representation or warranty, express or im plied, as to the fairness,
accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English fro m the Bahasa Indonesia. If
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