Flash Note Kalbe Farma

KLBF IJ / KLBF.JK
28 January 2011

HOLD
Results Satisfactory, Strong Plan for 2011 Price : Rp2,900
Target Price : Rp3,350

Key Financial and Valuation Metrics

Year-end 31-Dec 2008 2009 2010 2011F 2012F

Revenue (Rp bn) 7,877 9,087 10,200 11,688 13,387
EBITDA (Rp bn) 1,321 1,762 2,014 2,514 2,722
Net profit (Rp bn) 707 929 1,274 1,602 1,758
EPS (Rp) 72 97 136 171 188
EPS growth (%) 3.6 33.9 40.1 25.8 9.7
DPS (Rp) 10 13 23 34 43
Dividend yield (%) 0.4 0.5 0.8 1.2 1.5
P/E Ratio (x) 25.1 18.8 19.5 17.0 15.5
EV/EBITDA (x) 12.7 9.2 11.4 9.7 8.7
Return on Equity (%) 19.5 21.6 23.7 24.1 22.0
Net Gearing net cash net cash net cash net cash net cash

Source: Company and NISP Sekuritas

• 2010 results inline with expectation. Kalbe Farma booked revenue of Rp10.20tn in 2010, or up by 12.2% YoY
from Rp9.09tn in 2009. Net income was Rp1.27tn, or jump by 37.1% YoY from Rp929.0bn. The results came inline
with both ours and consensus expectation.
• Tax rate helps bottom line. Operating profit grew at approximately the same rate as revenue growth, increasing
about 14.6% YoY to Rp1.80tn from Rp1.57tn. A lower tax rate from 28% to 25% and the increased stake in Enseval
Putera Megatrading and PT Saka Farma Laboratories that reduced minority interest are the main catalysts for
stronger bottom line growth.
• Nutritional segment highest growth, price pressure seen this year. From all the segments, nutritional health
sales was the strongest, growing by 18.1% YoY to Rp2.29tn. Kalbe Farma’s direct marketing approach to mothers
and the stability of the price of skim milk price helped this segment’s performance and contribution. The company is
anticipating an increase in skim milk price where skim milk price has already increased by 10% for this year.
• New facility ready for pharmaceutical segment. Pharmaceutical sales grew by 16.1% YoY to Rp2.57tn in 2010.
The company believes that this growth can be continued in 2011. Its new production facility in Cikarang is currently
waiting for BPOM certification and will be dedicated for generic drugs’ tablet production line.
• Ready to health drinks launched to replace Extra Joss.The consumer health sales continued to decline with
the instability of the sales of Extra Joss. The company is preparing its ready to drink products such as Tipco, Fatigon
Hydro and E-Juss to be future drivers to this segment, targeting Rp100bn sales this year for total sales of these
products. Currently Extra Joss is still the key performer with around 30% contribution to the Consumer Health
segment or 4% contribution to total revenue. The company is also opening possibility that Extra Joss will also be
bottled following the success of that line in Philippines.
• Distribution division highest contributor to revenue...The distribution division was able to shake off the
divestment of the sub-packaging division successfully, growing by 13.6% YoY to Rp3.65tn from Rp3.21tn. Growth is
even higher if the packaging distribution is taken out completely as the distribution division itself grew from Rp2.88tn
to Rp3.42tn or by 18.8% YoY. This division is the biggest contributor to sales, with 35.8% contribution to total sales.
• …proven by strong quarterly results. This division is also the driver for 4Q10 revenue, growing by 52.3% QoQ
to Rp1.24tn. Total revenue in 4Q10 reached Rp2.93tn or up by 14.1% QoQ.
• Enseval right issue to support expansion plans. The company is the standby buyer for Enseval’s
(EPMT,Rp1,040) right issue where as much as Rp300bn is targeted to be raised. Enseval plans to plans to open 10-
12 branches this year to 2012, where investment cost ranges between Rp10bn-Rp20bn and its capex is between
Rp100-150bn per year. In addition Enseval plans to open 25 new Mitrasana clinics, targeting the Greater Jakarta area
for places that has need for outsourced medical clinics such as Industrial Areas and a new clinic in the Halim
Perdanakusuma Airport. Growth is expected to continue at the same rate for this year, between 12%-15% YoY.

Lyana Margareth
lyana.margareth@nispsekuritas.com
62-21-8379 5238 ext.7327
Kalbe Farma
• Cash level to support capex and target, risk on the upside. The company is set to continue to launch new
products both in the pharmaceutical segment and also for the consumer targeted segment. Capex for this year
reaches Rp650bn and the company has no trouble financing such plan as cash balance stands at Rp1.89tn. The
company offers guidelines for its revenue target to increase between 12%-15% while EPS is expected to reach
Rp155-Rp160 per share or 15%-18%. We estimate that the company could achieve at the higher end of this range
as our view itself estimates EPS to reach Rp170 this year. With the company’s commitment to introduce new health
products, preparation for the government’s insurance scheme plan, and its plan to conduct more intensive
efficiencies in its marketing expenses this year, our target is very feasible. In addition, Kalbe management is also still
opening possibility for acquisition of a pharmaceutical company or a health related food and beverage producer.
Currently KLBF is trading at 2011F PER of 2011F PER of 17.0x and EV/EBITDA of 9.7x.

Exh. 1: KLBF 2010 Results

(Rpbn) 2009 2010 YoY 3Q10 4Q10 QoQ

Revenue 9,087.3 10,199.6 12.2% 2,566.0 2,927.1 14.1%
Gross Profit 4,511.9 5,157.1 14.3% 1,343.1 1,430.0 6.5%
Operating Profit 1,565.9 1,795.3 14.6% 450.0 507.3 12.8%
Net Income 929.0 1,273.9 37.1% 330.0 372.0 12.9%

Gross Margin 49.7% 50.6% 0.9% 52.3% 48.9% -3.5%

Operating Margin 17.2% 17.6% 0.4% 17.5% 17.3% -0.2%
Net Margin 10.2% 12.5% 2.3% 12.8% 12.7% -0.1%

2010
Segment Sales (Rpbn) 2009 2010 YoY 3Q10 4Q10 QoQ Contribution
(%)
Prescription Pharmaceuticals 2,213.8 2,571.0 16.1% 652.8 662.3 1.5% 25.2%
Consumer Health 1,727.2 1,696.0 -1.8% 480.5 390.0 -18.8% 16.6%
Nutritionals 1,935.8 2,286.0 18.1% 615.7 631.2 2.5% 22.4%
Distribution and Packaging 3,210.5 3,646.6 13.6% 816.7 1,243.6 52.3% 35.8%
Total Sales 9,087.3 10,199.6 12.2% 2,565.7 2,927.1 14.1% 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 Head of Research bagus@nispsekuritas.com Ext 7311
Lyana Margareth Equity Analyst lyana.margareth@nispsekuritas.com Ext 7327
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.

DISCLAIMER:

This report was produced by PT NISP Sekuritas, a member of the Indonesia Stock Exchange (IDX). The Information contained in this report
has been obtained from public sources believed to be reliable and the options, analysis, forecasts, projections and expectations contained in
this report are based on such information and are expressions of belief only. No representation or warranty, express or implied, is made that
such information or opinion is accurate, complete or verified and it should not be replied upon as such. This report is provided solely for the
information of clients of PT NISP Sekuritas who has to make their own investment decisions without reliance on this report. Neither PT NISP
Sekuritas nor any officer or employee of PT NISP Sekuritas accept any liability whatsoever for any direct or consequential loss arising from
any use of this report or its contents. PT NISP Sekuritas may be involved in transactions contrary to any opinions herein to make markets, or
have positions in the securities recommended herein. PT NISP Sekuritas may seek or will seek investment banking or other business
relationships with the companies within this report. This report is a copyright of PT NISP Sekuritas. For further information please contact our
number 62-21-83795238 or fax 62-21-83795240.