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INDF, very cheap
🎯 🍝 📈 Rp13,897
Last 12-month cashflow -Rp 24.4 trillion ⬇️

January 7th, 2021
1 minute read

Sales
After two positive growth quarters in the first & second, third quarter sales declined by -4% to Rp 20.83 trillion. The three main businesses, consumer branded, Bogasari & Agriculture declined -5.7%, 0.5% & -2.6%. Average growth is now 0%. We expect growth to pick up to +2% & sales to reach Rp 22.26 trillion by the third quarter next year.

Cashflow
Cashflow was of course negative because of the large acquisition, at -Rp 27.8 trillion in the third quarter. We expect that the investment spending will now reduce back to a quarterly Rp 1.2 trillion & this when combined with our higher sales forecast will give an average quarterly free cashflow recovery to Rp 1.2 trillion in this next 12 months.

Sales growth to accelerate, a return to positive cashflow & lower debt, super cheap, much higher target price...

Data file & model
Balance sheet
Debt for the acquisition has pushed up the balance sheet net debt to Rp 39 trillion in the third quarter from Rp 10 trillion in the second quarter. With our forecast for a return to positive cashflow & assuming a dividend payment of Rp 1.9 trillion, the net debt will decline back to Rp 36 trillion in 12 months time.

Profit
With lower sales, net profit dropped to Rp 1.26 trillion in the third quarter from Rp 1.68 trillion in the second. The cash costs ratio of net profit add back depreciation minus sales as a percent of sales was higher at 89%. We use 88% costs to predict the next 12 months profit will decline slightly to Rp 6.3 trillion.

Value
INDF has now raised a net Rp 14 trillion of capital in the last five years. At the current market value of Rp 59.5 trillion, it’s 0.68X sales, only 0.37X assets, 0.75X equity with an 8% profitability & a 3.2% yield. Our cashflow forecast is Rp 4.9 billion. At 1.6% with a 0.4X adjustment, gives a higher target price, Rp13,897.
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