Panca Budi Idaman - PBID Panca Budi Idaman (PBID.

JK)

The storm may.. Or may not come.. But the BUY

ship is strong nonetheless..
13 March 2023
 We expect that Indonesia Economy will be resilient in the long
run supported by economy recovery, stable government and
Current Price : 1.560
peaceful transition during election years.
 Potential margin pressure as Government is pushing the bills to
Target Price : 3.183
introduce excise tape (cukai) for plastic materials. But actual Upside potential : 104%
impact may not be that significant.
 Maintain Buy rating with Target Price 3.183 in line with our MARKET DATA
expectations that sales will continue to drive growth. Market Cap (IDR) 2.936 Bn
52 Weeks high 1.815
Potential recovery on Indonesian Economy 52 Weeks low 1.535
Indonesia has shown a resilience through Covid-19 with a “V” shaped
recovery appeared. Indonesia also is poised to embrace a healthy FINANCIALS AND RATIOS (IDR)
election as one of the largest democracy nations in the world. Our Key ratios FY21 FY22
estimates suggest that the next incumbent (whoever it may be) will EPS 221.9 189.2
have huge interest to continue Jokowi’s administration existing Dividend Payout 50.7 49.9
infrastructure plan and maintain stable economy policy. (%)
Dividend Yield 7.1 6.9
(%)*
Resilience to navigate potential margin pressure
ROA (%) 15.9 12.4
As history has shown, Government of Indonesia keep pushing on bills ROE (%) 19.7 14.9
to introduce excise tape for Plastic materials. However, we remains
comfortable on PBID business considering the minuscule initial target, * = Refer into Dividend current year vs Net
Income of Previous Year
supported by thick GPM of PBID that able to absorb any potential
volatility.
L12M Price Performance
Also, we view that from business model perspective, PBID continue to
diversify its business and moved its portfolio from tertiary plastic
packaging to greener and primary needs plastics (ex: Food grade
plastics) that potentially have lesser impact from excise tape
implementation. Source: Stockbit

Stable business as future “Dividend Aristocrats” Shareholders

PBID historical figures have shown that Dividend Pay-out Ratios
reaching at the very least 50% post IPO. With 5 years streak since its Djonny Taslim 8.4%
Public Offering, PBID is on the way to be one of the potential Dividend PT. Alphen International 74.7%
Aristocrats in the future. Corporindo
Public 16.9%
Maintain Buy rating
Our estimates by combining DDM Model, DCF model, and PBV PER
PSR Band have reflected target price by the very least 3.183 or a
potential multibagger (return reaching 100%). Analyst:
Mohammad Rimba Putra,
Combined with strong balance sheet and position as market leader, AWP, RSA
PBID potential in the long run still remains favorable at the moment. m.rimba.putra@gmail.com
Instagram: @ayah.investor

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Macro economy update

Pricing of oil and plastics as major determinant on PE, PP, and HDPE (raw material of
plastic) have started to normalize with the stabilizing supply of oil globally. Latest
estimates from Trading Economics also reflected that prices in the long run will back to
the initial equilibrium of c. 88 USD / barrel.

Oil price forecast - tradingeconomics Polyethylene price and forecast - tradingeconomics

The stable expected price of oil also reflected on Polyethylene (PE) price that expected
to stabilized further in the long run. As such, we view that globally, pressure from raw
material fluctuation can be minimized by PBID.

Sectoral update

Indonesia economy - recovery underway with inflation pressure ahead

Indonesia has shown a remarkable performance through its “V” shaped recovery post
pandemic. Covid-19 infection rate has been kept stable and economy continue to
gradually reopening. Challenge persist on the inflation pressure coupled with
weakening domestic consumption as Indonesian started to reassess its domestic
consumption particularly on tertiary needs.

Indonesia GDP growth (Source: Trading Economics) Indonesia Inflation and Forecast - tradingeconomics

While this do not provide straight impact to several basic needs (including plastic for
packaging) - the weakening of overall economy may push a cautionary approach from
consumer goods player for any price increases that ultimately resulted into sacrifice of
its own margin in order to maintain stable volume.

Excise tape for plastic - the pressure is mounting vs potential market ahead

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Indonesia - together with Philippines, China, Thailand and Vietnam contributed 55% -
60% of overall plastics waste in the ocean according to World Bank. With other
countries across ASEAN (ex: Brunei, Vietnam, and Philippines) have started to introduce
bills for paid plastics waste, Indonesia still in the midst of lengthy process to have
straight forward bills for overall plastics industry.

On the other hand, statistics also shown that the consumption of plastics in Indonesia
remains one of the lowest in ASEAN. The substitute of plastics in Indonesia still
relatively difficult to beat low price of plastics and its handy and simple nature.

President Joko Widodo actually have started putting target on plastics excise tape since
2017. However, parliamentary approval was just been obtained in 2020. With
parliament approval in place, government continue to push bills for introduction of
Excise Tape (Cukai) for plastics and sugary drinks. The move is part of providing
additional state income while on the same time as part of initiatives to prevent higher
quantity of plastic waste.

As an initial step, since early 2018 several municipal (ex: Jakarta - Indonesia Capital City)
have introduced paid plastic bags in Supermarket. On the other hand, the move of
formal excise tape will be different with paid plastic bag as it will directly hit across all
plastic players. As the target has been set for Plastic Excise Tape ever since 2017 by
Jokowi’s administration, the realization of this initiatives remains unclear at the
moment as technical guidance still not yet been implemented as government remains
cautious on the volatile economy condition.

2019 2020 2021 2022 2023 (F)

Target Excise Tape from Government (IDR mn) 500,000 0 0 1,900,000 980,000
Excise Tape vs total plastic packaging industry revenue* 6.4% 0.0% 0.0% 18.2% 8.5%

Source: Internal
* Calculation of total sizing based on estimates on PBID plastic packaging revenue vs estimated
PBID market share provided - figures for illustration only and actual sizing may differ

With that in mind, we view that at the moment even though the bills will formally be
introduced, the impact of Excise tape will be relatively low. This is reflected on plastic
excise tape target in 2023 of only IDR 980 billion. For reference, state income from

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tobacco excise tape in 2022 reaching IDR 200 Trillion. As such, with only less than 5% of
target in comparison to tobacco, we viewed that Government do not put that much
pressure (and attention) at the moment to Plastic Industry.

Company Profile

Panca Budi Group was founded by Djonny Taslim in 1979 who started his career as a
general merchant distributing plastic bags made from PP, HDPE and PE. In 1990, Djonny
Taslim established PT Panca Budi Idaman Tbk (“the Company”) to produce and
distribute finished products of plastic bags.

The Company commenced its commercial operation by producing plastic bags in 1991.
In 2003,the Company was awarded ISO 9001 certification for its production process
management. The Company is an integrated company that manufactures and
distributes plastic packaging items. The Company’s business activities cover from the
trading of plastic resin, plastic packaging production, and plastic packaging distribution
both domestic and export.

The Company was the first company in Indonesia to have a brand on plastic bag
finished products. The first brand introduced by the Company was Pluit and further
develops other brands such as: Tomat, Bangkuang, Jeruk, Cabe, 222, Wayang, Gapura,
Sparta, Liberty, Dayana, PB and several other brands. In addition to that, the Company
was also the first company in the industry of plastic bag finished products that obtained
Halal certification from Majelis Ulama Indonesia in 2013 and a record of World Record
Museum of Indonesia in 2013.

PBID sample of products portfolio - source: Annual report

The company has been a leading players in the industry. With more than 30% market
share and distribution channel across Indonesia and overseas. The company brand and
corporate governance also have obtained several awards such as Top Brand Award,
Best Brand Award, and Forbes 50 Best companies.

Company sets target to obtained 35% market share (vs. Existing 33%). In 2023,
financially company set target of Sales growth 10-15%, NPM 9-12%, and Debt to Equity
ratio 23-25%.

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PBID product type and market share- source: Public Expose

PBID operational areas and export destination - source: Public expose

Financial Performance

Solid profitability to navigate Excise Tape and right track of business growth.

Post PBID IPO in 2017, PBID continue to reflect strong profitability tracks. Sales grew
from IDR 3.5 Trillion in 2017 to IDR 5 Trillion in 2022.

Profitability also continue to be maintained strong with double digit GPM of 16.5% in
FY22 and Net Profit Margin (NPM) of 7.06% in FY22.

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In terms of contribution, we note that Plastic Packaging continue to be top contributor
of PBID of more than 68% of total revenue in 2022. On the flip side, the GPM of Plastic
packaging is second highest that reaching 20.1% in FY22 - surpassed only by Others
segment of 24% GPM in FY22.

With plastic packaging historical GPM that even higher than blended GPM, we view
that the impact on plastic packaging excise tape will be further softened down by the
thick margin of PBID Plastic packaging segments. Further more, with competitive
advantage as margin leader, PBID will have the ability to pass on the pricing increase
due to excise tape to end buyers.

However, noting on PBID thick margin, the price increase may or may not happen as the
pricing pressure will not be that significant to PBID, whereas it will potentially impact
other plastic packaging players with thin level of margin.

As such, the pressure on margin can be a potential catalyst for PBID to further reach its
ambition to obtained 35% national market share of Indonesia packaging.

Strong history of Dividend aristocrats.

Post IPO by end of 2017, PBID continue to maintain its streak of dividend payment for
the last consecutive 5 years.

Combined with PBID status as one of the leader in the packaging industry, we viewed
that PBID is on its way to be recognized as one of strong Dividend payment stock in the
future.

Historically, PBID also continue to maintain at the very least Dividend Payout Ratios of
above 40% and expected Dividend Yield above 5%. As such, PBID will continue to be an
attractive choice for investor seeking routine dividend income.

Dividend Key Ratios 2020 2021 2022

Dividend Payout Ratio 50.19% 50.79% 49.89%
Dividend Per Share 60 101 111
Dividend Yield 6.11% 7.05% 6.90%

The dividend payment history also do not impact on the overall expansion plans of PBID.
Historically, PBID maintain solid capital structure with external gearing (Funded
Debt/Equity ratios) of below 0.5x despite continuous expansion on production in place.

Valuation

Our valuation indicates opportunity on PBID vs current pricing. We presented 6

different approaches that concludes PBID at the moment still have potential Margin of
Safety above 30% with potential upside reaching 104% as below summary indicates.

Approach Estimated Valuation Margin of Safety

Dividend Discount Model 3,682 136%
DCF - FCFE 3,823 145%
DCF FCFF 3,497 124%
PBV Band 2,159 38%

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 PER Band 2,754 77%
PSR Band 3,058 96%
Average Price 3,183 104%
*Price of stock as of 13 March 2023 closing

Our assumption for Discount rate basis for DDM and DCF based on the following
assumption:

WACC

Cost of Capital %

Cost of Equity 7.59%

Risk Free 5.100%
Beta 0.41
Risk Premium 6.064%

Cost of Debt 7.24%

Interest 9.25%
Tax 21.7%

Capital Structure
Equity 2,446,027 91.78%
Debt 219,212 8.22%
Total 2,665,239 100.00%

WACC 7.56%
Note:
 Risk Free Rate based on SBR010 rate
 Beta from Yahoo! Finance
 Interest on Cost of Debt based on highest interest rate as per 2021-2022 PBID FS
notes on Bank Interest Rate.

Dividend Discount Model

DCF - Free Cash Flow to Firm (FCFF)

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DCF - Free Cash Flow to Equity (FCFE)

PER PBV PSR Target and Historical Band

Our target price calculation is by Average Mid Band for each valuation and Industry
valuation.

Current Mid Band Industry Target Target Price

PBV Average Band 1.00 1.34 1.97 1.66 2,159
PER Average Band 8.24 7.58 21.52 14.55 2,754
PSR Average Band 0.58 0.58 1.7 1.14 3,058
Source: Stockbit

PBV Band Historical - source: Stockbit PER Historical Price = source: Stockbit

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 PSR Historical Price = source: Stockbit

Appendix - Financial Performance PBID and projection

Production capacity

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Source: Annual Report

ESG Initiatives and Porter Five Forces

PBID have started to implement several ESG Initiatives. Noting on its reputation as one
of the leader in the plastic Industry, PBID introduced plastic recycle program to
minimize environmental impact of plastic products.

ESG initiatives of plastic recycle - source: Public Expose

Apart from that, PBID also conducted other initiatives such as Reboisasi, support on
local community, scholarship, etc.

Analyst Certification

The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this
report, including any analyst(s) whose name(s) appear(s) as author of an individual section or
sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary
company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject
security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such
individual(s) is(are) named as author(s), and any other views or forecasts expressed herein,
including any views expressed on the back page of the research report, accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly
related to the specific recommendation(s) or views contained in this research report: Mohammad
Rimba Putra, AWP, RSA

Important disclosures

Equities: Stock ratings and basis for financial analysis

The issuer of this report believes an investor's decision to buy or sell a stock should depend on
individual circumstances such as the investor's existing holdings, risk tolerance and other
considerations and that investors utilise various disciplines and investment horizons when making
investment decisions. Ratings should not be used or relied on in isolation as investment advice.
Different securities firms use a variety of ratings terms as well as different rating systems to
describe their recommendations and therefore investors should carefully read the definitions of
the ratings used in each research report. Further, investors should carefully read the entire
research report and not infer its contents from the rating because research reports contain more
complete information concerning the analysts' views and the basis for the rating.

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