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报告摘要

Kimia Farma (KAEF IJ) Summary

Core Content

Kimia Farma is a state-owned pharmaceutical and healthcare services company in Indonesia, recognized as a key beneficiary of the country's growing healthcare sector. The company is currently valued at IDR930 with a target price of IDR1,200, implying a 29% increase, and a market capitalization of USD452M. It is recommended to initiate a "BUY" rating based on its potential for growth and restructuring efforts.

Main Points

Market Position: Kimia Farma is one of the leading producers of unbranded generic drugs in Indonesia, with an estimated 13% market share in 2012. It is also a pioneer in the pharmaceutical industry in the country.
Growth Drivers: The company is expected to benefit from the launch of the National Health Insurance in 2014, which is projected to increase government spending on unbranded generic drugs by 170% compared to 2013. Additionally, the expansion of its pharmacy network is anticipated to continue, with plans to add 100 new pharmacies annually over the next five years.
Synergy and Expansion: Kimia Farma's integrated business model, combining pharmaceutical production, retail pharmacies, and clinics, is expected to increase productivity and sales growth. The company is using the Kerja Sama Operational method to expand its retail stores, which allows for stable rental cost-to-revenue ratios.
Restructuring: The company is undergoing restructuring to improve logistics and shift focus towards higher-margin businesses such as ethical drugs, narcotics, and OTC. This is expected to stabilize its EBIT margin by FY16F at 5.2%.
Financial Outlook: Kimia Farma is forecasted to have a 16% CAGR in net profit over FY13-16F and a 19% CAGR in revenue over FY13-16F. The company is expected to remain net cash over FY14-16F, with a projected increase in capex to IDR150bn in FY14 and a return to positive free cash flow by FY17F.
Valuation: The current valuation is considered undemanding, as it is at a 20% discount to its peer, Kalbe Farma, and is at +1 standard deviation from its 12-month historical mean. The target price of IDR1,200 implies a FY15F P/E of 23x.
Competitors: Competitors in the pharmacy retail segment include Mitra Sarana (Kalbe Farma), Century, Guardian, Watson, and Boston (Matahari Putra).

Key Information

Financial Metrics (FY12A - FY16E)

Metric	FY12A	FY13A	FY14E	FY15E	FY16E
Revenue (IDR bn)	3,734.2	4,348.1	5,160.0	6,147.9	7,235.7
EBITDA (IDR bn)	293.5	280.7	328.3	378.5	441.5
Core Net Profit (IDR bn)	205.1	214.6	236.3	285.0	331.8
Core EPS (IDR)	7	39	43	51	60
Net DPS (IDR)	1	5	5	7	8
Core P/E (x)	nm	24.1	21.9	18.1	15.6
P/BV (x)	18.1	3.2	2.9	2.5	2.2
Net Dividend Yield (%)	0.1	0.5	0.6	0.7	0.8
ROAE (%)	15.2	14.0	13.7	14.6	14.9
ROAA (%)	10.6	9.4	9.0	9.4	9.5
Net Debt/Equity (%)	net cash	net cash	net cash	net cash	net cash

Share Price Performance

1 Month: +3.9%
3 Months: +23.2%
12 Months: -8.8%
Relative to Index: +1.5%, +12.8%, -6.4%

Key Risks

Regulatory changes in the pharmaceutical and retail industries
Currency and raw material price fluctuations
Consumer safety issues
Major economic slowdown affecting government spending and consumer purchasing power

Conclusion

Kimia Farma is well-positioned to benefit from the growth of Indonesia's healthcare sector, driven by the National Health Insurance and its integrated business model. The company's aggressive expansion plans and restructuring efforts are expected to enhance its operational efficiency and profitability. Despite the risks, its current valuation and growth prospects make it an attractive investment opportunity.

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