Flash Note Kalbe Farma

KLBF IJ / KLBF.JK
26 July 2010

Under Review
Kalbe Farma Books Rp572.3bn Net Income in 1H10 Price : Rp2,425
Target Price : Under Review

Key Financial and Valuation Metrics

Year-end 31-Dec 2008 2009 2010F 2011F 2012F
Revenue (Rp bn) 7,877 9,087 10,327 11,771 13,490
EBITDA (Rp bn) 1,321 1,762 2,023 2,424 2,517
Net profit (Rp bn) 707 929 1,231 1,502 1,607
EPS (Rp) 72 97 131 160 171
EPS growth (%) 3.6 33.9 35.4 22.0 7.0
DPS (Rp) 10 13 23 33 40
Dividend yield (%) 0.4 0.5 1.0 1.4 1.7
P/E Ratio (x) 25.1 18.8 18.5 11.4 10.6
EV/EBITDA (x) 12.7 9.2 10.4 6.1 5.6
Return on Equity (%) 19.5 21.5 23.1 23.0 20.7
Net Gearing net cash net cash net cash net cash net cash

Source: Company and NISP Sekuritas

• Net income jumps by 43.5% YoY. During 1H10, Kalbe Farma managed to book Rp572.3bn in net income, a
43.5% YoY leap from Rp398.7bn in 1H09. The results accounted for 46.4% of the Rp1.23tn we had projected for
2010 FY results and was also relatively in line with consensus expectation where the consensus figure was for
Rp1.22tn for 2010F FY net income. Most of the growth came from strong 1H10 revenue of Rp4.71tn (+11.6% YoY),
which is inline with our and consensus’ estimates.
• Stronger Rupiah lowered direct cost. Such growth on revenue was coupled with Kalbe’s ability to manage its
cost, which was largely helped by the stronger Rupiah. During 1H10 the company recorded Rp2.32tn of COGS or only
8.2% YoY higher than Rp2.15tn in 1H09. This sent gross profit and operating profit to increase by 15.2% YoY and
20.0% YoY to Rp2.38tn and Rp838.2bn respectively.
• Higher operating expense absorbed profitability… Such condition pushes the company’s margin to improve
slightly where its gross margin and operating margin rose to 50.7% and 17.8% in 1H10 from 49.1% and 16.6%
respectively. This slight improvement in operating margin was due to increased selling and R&D expenses, as there is
a number of new products launched during this 1H10. The company states that it is confident that higher allocation
to these posts could be beneficial to short term and long term profitability.
• However, lower other expenses helped the bottom line. The company booked lower interest expense of
Rp7.1bn compared to Rp 35.4bn of interest expense last year, as in June 2009 the company has repaid its
Rp300.0bn bond last year. As the company’s raw material is imported, it needs to maintain a specific balance of its
liquid assets in the form of foreign currency. Therefore a strengthening of the Rupiah will cause the company to book
a foreign exchange loss. However the relatively stabile Rupiah, made the company only book a foreign exchange loss
of Rp16.6bn compared to Rp57.4bn loss booked in 1H09.
• On a quarterly basis, growth accelerated by 15.1%. The company booked Rp2.52tn of sales in the second
quarter, higher by 15.1% QoQ, compared to Rp2.19tn booked in the first quarter of this year. This caused net
income to also rise higher by 23.3% QoQ to Rp 316.0bn.
• Distribution and packaging remains key revenue driver. Distribution and packaging remains the company’s
revenue driver by contributing 33.7% to total revenue. The segment grew at 7.6% YoY to Rp1.59tn, which could
indicate that there is less room for growth in this line. Second to the position was Kalbe’s core business of
prescription pharmaceuticals, which grew by 16.4% YoY and contributes 26.7% to total revenue. It is interesting to
note that the nutritional division sales which mainly targets mothers and children, enjoyed the highest growth by
19.8% YoY, and 22.1% contribution.
• Overall, the company’s performance remains inline with our expectation. However, as the share price has
exceeded our target price, we have put Kalbe Farma under review. For now, the company is currently trading at
2010F, PER of 18.5x and EV/EBITDA of 10.4x.

Lyana Margareth
lyana.margareth@nispsekuritas.com
62-21-8379 5238 ext.7327
Kalbe Farma

Exh. 1: KLBF 1H10 Results

(Rpbn) 1H10 1H09 % YoY 2Q10 1Q10 % QoQ
Revenue 4,706.8 4,217.5 11.6% 2,518.5 2,188.3 15.1%
COGS 2,322.8 2,147.5 8.2% 1,232.9 1,089.9 13.1%
Gross Profit 2,384.0 2,070.0 15.2% 1,285.6 1,098.4 17.0%
Operating Profit 838.2 698.4 20.0% 451.5 386.7 16.8%
Other Income (Expense) 3.5 -35.0 N.A 3.0 0.6 16.8%
- Gain (Loss) on Foreign Exchange -16.6 -57.4 -71.1% -3.4 -13.1 16.8%
- Interest Expense -7.1 -35.4 -79.9% -4.7 -2.4 16.8%
Net Income 572.3 398.7 43.5% 316.0 256.3 23.3%

Gross Margin 50.7% 49.1% 1.6% 51.0% 50.2% 0.9%

Operating Margin 17.8% 16.6% 1.2% 17.9% 17.7% 0.3%
Net Margin 12.2% 9.5% 2.7% 12.5% 11.7% 0.8%

Segment Sales 1H10 1H09 % YoY Contribution (%)

Prescription Pharmaceuticals 1,255.9 1,078.8 16.4% 26.7%

Consumer Health 825.6 797.1 3.6% 17.5%
Nutritionals 1,039.0 867.2 19.8% 22.1%
Distribution and Packaging 1,586.3 1,474.5 7.6% 33.7%
Total Sales 4,706.8 4,217.5 11.6% 100.0%

Source: Company

2
Kalbe Farma

PT NISP Sekuritas
Puri Imperium Building (Head Office)
Office Plaza Unit G. 2, 3, 5
Jl. Kuningan Madya Kav. 5-6, Kuningan
Jakarta 12980 Indonesia
Phone. (021) 8379 5238 (hunting)
Fax. (021) 8379 5240
Email: info@nispsekuritas.com
Website: www.nispsekuritas.com

Research Team
+62 21 83795238
Bagus Hananto Deputy Head of Research bagus@nispsekuritas.com Ext 7311
Adrianus Bias Prasuryo Equity Analyst adrianus.bias@nispsekuritas.com Ext 7309
Lyana Margareth Equity Analyst lyana.margareth@nispsekuritas.com Ext 7327
Ariawan Fixed Income Analyst ariawan@nispsekuritas.com Ext 7711
Yuni Pratiwi Research Assistant yuni.pratiwi@nispsekuritas.com Ext 7338

Branches
Phone: Fax:

Jl. Pluit Kencana Raya No. 59

Pluit Jakarta (021) 6667 5050 (hunting) (021) 6667 5051
Jakarta Utara 14450

Wisma HSBC, 3A Floor

Bandung Jl. Asia Afrika No. 116 (022) 426 7288 (022) 426 8009
Bandung 40261

Intiland Tower, 1st Floor Suite 7

Surabaya Jl. Panglima Sudirman 101-103 (031) 547 1213 (031) 547 1314
Surabaya 60271

Medan Jl. Bogor No. 51, Medan (061) 415 4512 (061) 456 4753

Rating Definitions
BUY : We expect this stock to give total return of above 15% over the next 12 months.
HOLD : We expect this stock to give total return of between -15% and 15% over the next 12 months.
SELL : We expect this stock to give total return of -15% or lower over the next 12 months.

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