Kalbe Farma

Rp1,600 - UNDERPERFORM
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Merlissa Trisno Efficiency mode

merlissa.trisno@clsa.com Cutting ad/promotion line to sustain profitability
+62 21 5088 7834
Stronger health awareness could help Kalbe Farma (KLBF IJ) OTC demand, yet is
less meaningful as vitamin-related contributes less than 5% of company sales.
Within the span of five years, the company has halved its medical reps/
marketing/sales force across its divisions to sustain a 14.5-15.5% Ebit margin. We
believe the next cost cut might involve ad/promotion line (10% of sales in 20-21CL).
Vaccine development is ongoing, with an allocated budget of Rp10-20bn on
clinical trial in 4Q20. A final product with estimated pricing of US$15/dose might
be launched around mid-2021. We make no changes to our earnings and target
11 August 2020 price (Rp1,700), yet we downgrade from Outperform to Underperform.

Indonesia Sustainable health-related demand?

Consumer Covid-19 led to stronger health awareness across income level and even more so
for the mid/upper segment due to affordability. Kalbe’s herbal and vitamin products
Reuters KLBF.JK grew 15-20%; the company also plans to launch immune-booster products such as
Bloomberg KLBF IJ
Fatigon Promuno. Vitamin-related contribution is c.10% of consumer health division,
Priced on 11 August 2020 hence sales growth of 6-7% in 1Q/2Q20. Coupled with multivitamin in the nutritional
Jakarta Comp @ 5,190.2
segment, the overall contribution is still less than 5% of the company’s total sales.
12M hi/lo Rp1,690/865
12M price target Rp1,700
Next cost-cutting strategy
±% potential +6% Within the span of five years, Kalbe has halved its medical reps/marketing/sales
force across its divisions to sustain a 14.5-15.5% Ebit margin. We believe next cost
Shares in issue 46,875.1m
Free float (est.) 40.0% cutting might involve ad/promotion line (10% of sales in 20-21CL), compared to
11-13% historically. By far, the company claimed that market share in nutritional
Market cap US$5.1bn
and OTC segments have been stable. Kalbe’s ad/sales ratio has been lower
3M ADV US$6.4m
compared to Tempo Scan (TSPC IJ)’s 12% as per 1H20.
Foreign s'holding 80.0%
Vaccine development update
Major shareholders
PT Gira Sole Prima 10.2% The Kalbe-Genexine collaboration on a Covid-19 vaccine is under preparation for a
PT Santa Seha Sanadi 9.6% clinical trial protocol. There is a possibility to combine phases 2 and 3 depending on
the Indo FDA and MoH decision with an allocated clinical trial budget of Rp10-20bn
(less than 1% earnings). Genexine capacity on bulk vaccine is around 10m doses,
while Kalbe’s filling capacity is 60-70m. A final product with estimated pricing of
Blended ESG Score (%)* US$15/dose might be launched around mid-2021.
Overall 59.2
Country average 53.9 Downgrade to Underperform
GEM sector average 66.4
*Click to visit company page on clsa.com for details We have yet to factor in the vaccine financial contribution given margin uncertainty.
We make no change to our earnings estimates or target price. We downgrade from
Stock performance (%) Outperform to Underperform due to limited catalysts.
1M 3M 12M
Absolute 8.8 15.5 11.1 Financials
Relative 5.5 3.3 34.5 Year to 31 December 18A 19A 20CL 21CL 22CL
Abs (US$) 7.1 17.9 8.0 Revenue (Rpbn) 21,074 22,633 23,791 25,881 28,014
Net profit (Rpbn) 2,457 2,507 2,632 2,902 3,268
EPS (Rp) 52.42 53.48 56.16 61.90 69.72
CL/consensus (15) (EPS%) - - 99 101 102
EPS growth (% YoY) 2.2 2.0 5.0 10.2 12.6
PE (x) 30.5 29.9 28.5 25.8 22.9
Dividend yield (%) 1.6 1.6 1.2 1.6 1.9
FCF yield (%) 1.7 0.5 1.6 1.8 2.1
PB (x) 5.1 4.7 4.3 3.9 3.6
ROE (%) 17.6 16.4 15.8 15.8 16.2
Net debt/equity (%) (18.3) (13.3) (14.2) (14.9) (15.2)
Source: Bloomberg Source: www.clsa.com

CLSA and CL Securities Taiwan Co., Ltd. (“CLST”) do and seek to do business with companies covered in its research reports. As such,
investors should be aware that there may be conflicts of interest which could affect the objectivity of the report. Investors should consider
this report as only a single factor in making their investment decisions. For important disclosures please refer to page 11.
 
  
 Efficiency mode Kalbe Farma - U-PF

Financials at a glance
Year to 31 December 2018A 2019A 2020CL (% YoY) 2021CL 2022CL

Profit & Loss (Rpbn)

Revenue 21,074 22,633 23,791 5.1 25,881 28,014
Cogs (ex-D&A) (10,887) (12,025) (12,698) (13,884) (15,074)
Gross Profit (ex-D&A) 10,187 10,609 11,093 4.6 11,997 12,939
SG&A and other expenses (6,534) (6,933) (7,249) (7,830) (8,425)
Op Ebitda 3,653 3,676 3,844 4.6 4,167 4,515
Depreciation/amortisation (340) (365) (420) (396) (385)
Op Ebit 3,314 3,310 3,424 3.4 3,771 4,130
Net interest inc/(exp) 96 98 62 (36.8) 70 84
Other non-Op items (103) (5) - - -
Profit before tax 3,306 3,403 3,486 2.4 3,841 4,213
Taxation (809) (865) (782) (861) (860)
Profit after tax 2,497 2,538 2,704 6.6 2,980 3,353
Minority interest (40) (31) (72) (78) (85)
Net profit 2,457 2,507 2,632 5 2,902 3,268
Adjusted profit 2,457 2,507 2,632 5 2,902 3,268
Cashflow (Rpbn) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Operating profit 3,314 3,310 3,424 3.4 3,771 4,130
Depreciation/amortisation 340 365 420 14.8 396 385
Working capital changes (101) (468) (718) (684) (738)
Other items (1,043) (1,043) (926) (1,010) (1,016)
Net operating cashflow 2,509 2,165 2,199 1.6 2,474 2,761
Capital expenditure (1,250) (1,779) (1,000) (1,100) (1,210)
Free cashflow 1,260 386 1,199 211.1 1,374 1,551
M&A/Others 126 138 134 (2.7) 141 154
Net investing cashflow (1,124) (1,641) (866) (959) (1,056)
Increase in loans 40 459 (20) - -
Dividends (1,172) (1,219) (928) (1,185) (1,451)
Net equity raised/other 115 123 (26) 78 85
Net financing cashflow (1,017) (636) (973) (1,106) (1,366)
Incr/(decr) in net cash 369 (113) 361 408 339
Exch rate movements - - - - -
Balance sheet (Rpbn) 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Cash & equivalents 3,153 3,040 3,402 11.9 3,810 4,149
Accounts receivable 3,256 3,573 3,965 11 4,457 4,980
Other current assets 4,239 4,609 5,017 8.8 5,395 5,778
Fixed assets 6,253 7,667 8,247 7.6 8,950 9,776
Investments - - - - -
Intangible assets 433 663 663 0 663 663
Other non-current assets 812 713 713 0 713 713
Total assets 18,146 20,266 22,006 8.6 23,988 26,058
Short-term debt 97 169 150 (11.5) 150 150
Accounts payable 1,290 1,216 1,287 5.9 1,401 1,517
Other current liabs 899 1,192 1,203 0.9 1,275 1,327
Long-term debt/CBs 260 648 648 0 648 648
Provisions/other LT liabs 305 334 334 0 334 334
Shareholder funds 14,623 15,893 17,501 10.1 19,218 21,035
Minorities/other equity 671 814 884 8.7 962 1,047
Total liabs & equity 18,146 20,266 22,006 8.6 23,988 26,058
Ratio analysis 2018A 2019A 2020CL (% YoY) 2021CL 2022CL
Revenue growth (% YoY) 4.4 7.4 5.1 8.8 8.2
Ebitda margin (%) 17.3 16.2 16.2 16.1 16.1
Ebit margin (%) 15.7 14.6 14.4 14.6 14.7
Net profit growth (%) 2.2 2.0 5.0 10.2 12.6
Op cashflow growth (% YoY) 36.8 (13.7) 1.6 12.5 11.6
Capex/sales (%) 5.9 7.9 4.2 4.3 4.3
Net debt/equity (%) (18.3) (13.3) (14.2) (14.9) (15.2)
Net debt/Ebitda (x) - - - - -
ROE (%) 17.6 16.4 15.8 15.8 16.2
ROIC (%) 20.4 17.9 17.2 17.4 18.0
Source: www.clsa.com

Find CLSA research on Bloomberg, Thomson Reuters, FactSet and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

11 August 2020 merlissa.trisno@clsa.com 2

 
  
 Efficiency mode Kalbe Farma - U-PF

Sustainable health-related demand?

Rising consumption of Covid-19 has led to stronger health awareness across income level and even more
health-related products… so for mid/upper segment due to affordability. Surprisingly, even the mid/low
segment consumes more vitamin C these days. Sido Muncul (SIDO IJ) vitamin C
product (Rp1500/sachet) has been doing really well.

As per 2Q20, sales (ex-distribution) grew at -3% YoY with consumer health and
distribution delivering positive sales growth. As for prescription business, licensed
and branded generic booked -23% and -10% sales growth in 2Q20. During similar
period, unbranded generic also booked -9% sales growth.

Figure 1 Figure 2

Sales (ex-distribution) growth trend Sales growth trend across divisions

20% 15% 1Q20 2Q20

15% 10%

5%
10%

0%
5%
-5%
0%
-10%
-5%
-15%
Prescription Consumer Health Nutritional Distribution

Source: CLSA, Company Source: CLSA, Company

Under the consumer health division, Kalbe’s herbal and vitamin products grew 15-
20%. The company also plans to launch an immune-booster product such as Fatigon
Promuno. Vitamin-related contribution is c.10% of consumer health division, hence
its sales growth of 6-7% in 1Q/2Q20.

…but still less than 5% of Coupled with multivitamin in nutritional segment, the overall contribution is still
company’s sales less than 5% of the company’s total sales.

Figure 3

Double-digit growth for Consumer health sales breakdown

vitamin/herbal related
20%

15%

10%

5%

0%

-5%

-10%
Vitamin/herbal OTC Energy drink Beverage
Source: CLSA, Company

11 August 2020 merlissa.trisno@clsa.com 3

 
  
 Efficiency mode Kalbe Farma - U-PF

Next cost-cutting strategy

Cutting salary and next
ad/promotion
Within the span of five years, Kalbe has cut its medical reps/marketing/sales force
by half across its divisions to sustain 14.5-15.5% Ebit margin. We believe next cost
cutting might involve ad/promotion line (10% of sales in 20-21CL), compared to
11-13% historically. By far, the company claimed that market share in nutritional
and OTC segments have been stable. Kalbe’s ad/sales ratio has been lower
compared to Tempo Scan (TSPC IJ)’s 12% as per 1H20.

Figure 4 Figure 5

Kalbe’s gross and Ebit margin trend Pharma’s ad/sales ratio

52.0% 19.0% 18% 2019 1H20
51.0% 18.0% 16%
50.0%
17.0% 14%
49.0%
16.0% 12%
48.0%
47.0% 15.0% 10%
46.0% 14.0% 8%
45.0%
13.0% 6%
44.0%
12.0% 4%
43.0%
42.0% Gross margin Ebit margin 11.0% 2%

41.0% 10.0% 0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 20CL 21CL KLBF TSPC KAEF
Source: CLSA, Company Source: CLSA, Company

Figure 6

Cutting staffs by half in the Staffs (medical reps, marketing, sales force) number trend
past five years 3,000 2014 2020

2,500

2,000

1,500

1,000

500

0
Prescription Consumer health Nutritional
Source: CLSA, Company

Vaccine development update

The Genexine collaboration on a Covid-19 vaccine is under preparation for clinical
trial protocol. There is possibility to combine phase-2 and 3 depending on Indo FDA
and MoH decision with allocated clinical trial budget of Rp10-20bn (less than 1%
earnings). Genexine capacity on bulk vaccine is around 10mn doses, while Kalbe’s
filling capacity is 60-70m. Final product with estimated pricing of US$15/dose
might be launched around mid-2021.

11 August 2020 merlissa.trisno@clsa.com 4

 
  
 Efficiency mode Kalbe Farma - U-PF

Figure 7

Six candidates under 26 candidate vaccines in clinical evaluation

phase 3 clinical trial Vaccine developer/manufacturer Vaccine platform Clinical stage
University of Oxford/AstraZeneca Non-replicating viral vector Phase 3
Sinovac Inactivated Phase 3
Wuhan Institute of Biological Products/Sinopharm Inactivated Phase 3
Beijing Institute of Biological Products/Sinopharm Inactivated Phase 3
Moderna RNA Phase 3
BioNTech/Fosun Pharma/Pfizer RNA Phase 3
CanSino Biological Inc/Beijing Institute of Biotechnology Non-replicating viral vector Phase 2
Anhui Zhifei Longcom Biopharmaceutical/Institute of Protein Subunit Phase 2
Microbiology, Chinese Academy of Sciences
Institute of Medical Biology, Chinese Academy of Medical Inactivated Phase 1/2
Sciences
Inovio Pharmaceuticals/International Vaccine Institute DNA Phase 1/2
Osaka University/AnGes/Takara Bio DNA Phase 1/2
Cadila Healthcare Limited DNA Phase 1/2
Genexine Consortium DNA Phase 1/2
Bharat Biotech Inactivated Phase 1/2
Janssen Pharmaceutical Companies Non-replicating viral vector Phase 1/2
Novavax Protein Subunit Phase 1/2
Kentucky Bioprocessing, Inc Protein Subunit Phase 1/2
Arcturus/Duke-NUS RNA Phase 1/2
Gamaleya Research Institute Non-replicating viral vector Phase 1
Clover Biopharmaceuticals Inc/GSK/Dynavax Protein Subunit Phase 1
Vaxine Pty Ltd/Medytox Protein Subunit Phase 1
University of Queensland/CSL/Seqirus Protein Subunit Phase 1
Imperial College London RNA Phase 1
Curevac RNA Phase 1
People's Liberation Army (PLA) Academy of Military RNA Phase 1
Sciences/Walvax Biotech
Medicago Inc VLP Phase 1
Medigen Vaccine Biologics Corporation/NIAID/Dynavax Protein Subunit Phase 1
Source: CLSA, WHO

Figure 8 Figure 9

KLBF’s 12-month forward PE KLBF’s 12-month forward EV/Ebitda

(X) (X)
36.0 24.0
34.0
22.0
32.0
+1sd 30.83x 20.0 +1sd 20.42x
30.0
28.0 18.0 avg 18.23x
avg 27.45x
26.0
16.0 -1sd 16.04x
24.0 -1sd 24.06x
22.0 14.0
20.0 12.0
18.0
10.0
16.0
Aug 17 Feb 18 Aug 18 Feb 19 Aug 19 Feb 20
Aug 17 Feb 18 Aug 18 Feb 19 Aug 19 Feb 20

Source: CLSA, Bloomberg Source: CLSA, Bloomberg

11 August 2020 merlissa.trisno@clsa.com 5

 
  
 Efficiency mode Kalbe Farma - U-PF

Figure 10

Consumer peers valuation

PER, x EV/Ebitda, x ROE (%) Ebit margin (%) EPS growth PEG Market cap
Company 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 x US$ m
Staples
Unilever Indo 42 37 29 27 140 145 23 24 (1%) 12% 3.0 21,180
HM Sampoerna 16 16 12 12 35 36 14 14 (11%) 0% (1.4) 13,274
Gudang Garam 11 10 8 7 17 16 11 11 (16%) 3% 4.1 6,765
Kalbe Farma 28 26 19 18 16 16 14 15 5% 10% 2.5 5,173
Indofood 14 13 7 7 14 14 13 13 8% 8% 1.5 4,658
Indofood CBP 20 19 12 11 22 21 18 18 16% 9% 2.1 8,133
Mayora Indah 22 21 13 12 22 20 13 13 17% 3% 7.0 3,494
Staples average 22 20 14 13 38 38 15 15 3% 6% 2.7 8,954
Retailers
Mitra Adiperkasa 99 16 3 2 2 11 4 9 (88%) 535% 0.0 785
Matahari Department Store (8) 6 4 2 (31) 40 (7) 10 (133%) (227%) (0.0) 237
Ace Hardware 34 25 12 15 17 21 12 14 (18%) 33% (1.8) 1,951
Ramayana 81 12 1 1 1 9 (1) 8 (92%) 559% (0.9) 304
Retailer average 51 15 5 5 (3) 20 2 10 (83%) 225% (0.7) 819
Consumer average 33 18 11 10 23 32 10 13 (28%) 86% 1.5 5,996
Source: CLSA, Bloomberg

Valuation details
For Kalbe Farma, our target price is based on a target PE multiple. We use 27x 21CL
EPS, near its three-year mean, as we expect the company to have more stable
demand during this pandemic. Strengthening exchange rate should also help its
margin, albeit Covid-19 might put risk on hospital traffic, hence its prescription
business. This is on top of its venture in biosimilar with commercial production
starting in 2020. Kalbe's diversified business model, dominant market share, strong
distribution network, and healthy balance sheet will continue to be key to its
investment thesis in the longer term. The stock has de-rated since mid-2014 due
to stronger-than-expected cannibalisation by unbranded generics upon
implementation of national healthcare insurance (JKN).

Investment risks
Kalbe Farma's business is well diversified into four main categories; hence, most of
the risks are generally compartmentalised into its specific division instead of the
overall company. However, Covid-19 might put risk on hospital traffic and, hence,
its prescription business in the near term. For its pharmaceutical division, there is a
short-term risk of continued cannibalisation of its branded generics segment by
unbranded generics, although we believe this will be to a lesser degree going
forward. As for the overall company, USD-IDR exchange-rate volatility is a
substantial risk as 60-70% of the company's raw material costs are denominated in
USD, whereas 95% of sales are denominated in Rupiah.

11 August 2020 merlissa.trisno@clsa.com 6

 
  
 Efficiency mode Kalbe Farma - U-PF

Detailed financials
Profit & Loss (Rpbn)
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Revenue 19,374 20,182 21,074 22,633 23,791 25,881 28,014
Cogs (ex-D&A) (9,588) (10,014) (10,887) (12,025) (12,698) (13,884) (15,074)
Gross Profit (ex-D&A) 9,786 10,169 10,187 10,609 11,093 11,997 12,939
Research & development costs (192) (240) (244) (287) (301) (328) (355)
Selling & marketing expenses (5,193) (5,217) (5,099) (5,358) (5,609) (6,060) (6,520)
Other SG&A (1,047) (1,141) (1,192) (1,289) (1,339) (1,442) (1,550)
Other Op Expenses ex-D&A - - - - - - -
Op Ebitda 3,355 3,570 3,653 3,676 3,844 4,167 4,515
Depreciation/amortisation (298) (356) (340) (365) (420) (396) (385)
Op Ebit 3,057 3,214 3,314 3,310 3,424 3,771 4,130
Interest income 132 135 126 138 134 141 154
Interest expense (28) (36) (30) (40) (73) (71) (71)
Net interest inc/(exp) 104 99 96 98 62 70 84
Associates/investments - - - - - - -
Forex/other income - - - - - - -
Asset sales/other cash items 6 12 (3) 5 - - -
Provisions/other non-cash items (76) (83) (101) (10) 0 0 0
Asset revaluation/Exceptional items - - - - - - -
Profit before tax 3,091 3,241 3,306 3,403 3,486 3,841 4,213
Taxation (740) (788) (809) (865) (782) (861) (860)
Profit after tax 2,351 2,453 2,497 2,538 2,704 2,980 3,353
Preference dividends - - - - - - -
Profit for period 2,351 2,453 2,497 2,538 2,704 2,980 3,353
Minority interest (51) (50) (40) (31) (72) (78) (85)
Net profit 2,300 2,404 2,457 2,507 2,632 2,902 3,268
Extraordinaries/others 0 0 0 0 0 0 0
Profit avail to ordinary shares 2,300 2,404 2,457 2,507 2,632 2,902 3,268
Dividends (891) (1,031) (1,172) (1,219) (928) (1,185) (1,451)
Retained profit 1,409 1,372 1,285 1,288 1,705 1,717 1,818
Adjusted profit 2,300 2,404 2,457 2,507 2,632 2,902 3,268
EPS (Rp) 49.1 51.3 52.4 53.5 56.2 61.9 69.7
Adj EPS [pre excep] (Rp) 49.1 51.3 52.4 53.5 56.2 61.9 69.7
Core EPS (Rp) 49.1 51.3 52.4 53.5 56.2 61.9 69.7
DPS (Rp) 19.0 22.0 25.0 26.0 19.8 25.3 31.0

Profit & loss ratios

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Growth (%)
Revenue growth (% YoY) 8.3 4.2 4.4 7.4 5.1 8.8 8.2
Ebitda growth (% YoY) 14.4 6.4 2.3 0.6 4.6 8.4 8.3
Ebit growth (% YoY) 15.5 5.1 3.1 (0.1) 3.4 10.1 9.5
Net profit growth (%) 14.7 4.5 2.2 2.0 5.0 10.2 12.6
EPS growth (% YoY) 14.7 4.5 2.2 2.0 5.0 10.2 12.6
Adj EPS growth (% YoY) 14.7 4.5 2.2 2.0 5.0 10.2 12.6
DPS growth (% YoY) 0.0 15.8 13.6 4.0 (23.9) 27.7 22.5
Core EPS growth (% YoY) 14.7 4.5 2.2 2.0 5.0 10.2 12.6
Margins (%)
Ebitda margin (%) 17.3 17.7 17.3 16.2 16.2 16.1 16.1
Ebit margin (%) 15.8 15.9 15.7 14.6 14.4 14.6 14.7
Net profit margin (%) 11.9 11.9 11.7 11.1 11.1 11.2 11.7
Core profit margin 11.9 11.9 11.7 11.1 11.1 11.2 11.7
Op cashflow margin 9.5 9.1 11.9 9.6 9.2 9.6 9.9
Returns (%)
ROE (%) 20.6 19.1 17.6 16.4 15.8 15.8 16.2
ROA (%) 16.1 15.3 14.4 12.9 12.6 12.7 13.1
ROIC (%) 24.4 22.2 20.4 17.9 17.2 17.4 18.0
ROCE (%) 33.7 30.7 27.9 24.5 22.6 22.9 23.0
Other key ratios (%)
Effective tax rate (%) 23.9 24.3 24.5 25.4 22.4 22.4 20.4
Ebitda/net int exp (x) - - - - - - -
Exceptional or extraord. inc/PBT (%) - - - - - - -
Dividend payout (%) 38.7 42.9 47.7 48.6 35.2 40.8 44.4
Source: www.clsa.com

11 August 2020 merlissa.trisno@clsa.com 7

 
  
 Efficiency mode Kalbe Farma - U-PF

Balance sheet (Rpbn)

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Cash & equivalents 2,896 2,785 3,153 3,040 3,402 3,810 4,149
Accounts receivable 2,631 2,876 3,256 3,573 3,965 4,457 4,980
Inventories 3,344 3,557 3,475 3,738 4,140 4,507 4,879
Other current assets 522 639 765 871 877 888 899
Current assets 9,393 9,857 10,648 11,222 12,384 13,662 14,907
Fixed assets 4,556 5,343 6,253 7,667 8,247 8,950 9,776
Investments - - - - - - -
Goodwill 400 420 433 663 663 663 663
Other intangible assets 0 0 0 0 0 0 0
Other non-current assets 877 997 812 713 713 713 713
Total assets 15,226 16,616 18,146 20,266 22,006 23,988 26,058
Short term loans/OD 149 173 97 169 150 150 150
Accounts payable 1,127 1,109 1,290 1,216 1,287 1,401 1,517
Accrued expenses 409 322 301 416 416 416 416
Taxes payable 181 191 188 227 205 226 225
Other current liabs 451 433 410 550 582 634 686
Current liabilities 2,317 2,227 2,286 2,577 2,639 2,826 2,994
Long-term debt/leases/other 132 144 260 648 648 648 648
Convertible bonds - - - - - - -
Provisions/other LT liabs 313 351 305 334 334 334 334
Total liabilities 2,762 2,722 2,852 3,559 3,621 3,808 3,976
Share capital 469 469 469 469 469 469 469
Retained earnings 11,416 12,788 14,073 15,361 17,066 18,783 20,601
Reserves/others 25 24 82 63 (34) (34) (34)
Shareholder funds 11,909 13,281 14,623 15,893 17,501 19,218 21,035
Minorities/other equity 555 613 671 814 884 962 1,047
Total equity 12,464 13,894 15,295 16,707 18,385 20,180 22,082
Total liabs & equity 15,226 16,616 18,146 20,266 22,006 23,988 26,058
Total debt 281 318 357 817 797 797 797
Net debt (2,615) (2,467) (2,796) (2,224) (2,604) (3,012) (3,351)
Adjusted EV 72,940 73,146 72,875 73,590 73,280 72,950 72,696
BVPS (Rp) 254.1 283.3 312.0 339.1 373.3 410.0 448.7

Balance sheet ratios

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Key ratios
Current ratio (x) 4.1 4.4 4.7 4.4 4.7 4.8 5.0
Growth in total assets (% YoY) 11.2 9.1 9.2 11.7 8.6 9.0 8.6
Growth in capital employed (% YoY) 14.3 16.2 11.2 15.9 9.0 8.8 9.1
Net debt to operating cashflow (x) - - - - - - -
Gross debt to operating cashflow (x) 0.2 0.2 0.1 0.4 0.4 0.3 0.3
Gross debt to Ebitda (x) 0.1 0.1 0.1 0.2 0.2 0.2 0.2
Net debt/Ebitda (x) - - - - - - -
Gearing
Net debt/equity (%) (21.0) (17.8) (18.3) (13.3) (14.2) (14.9) (15.2)
Gross debt/equity (%) 2.3 2.3 2.3 4.9 4.3 4.0 3.6
Interest cover (x) 113.3 92.0 115.7 85.3 49.0 55.4 60.7
Debt Cover (x) 6.6 5.8 7.0 2.7 2.8 3.1 3.5
Working capital analysis
Inventory days 117.2 121.5 114.3 106.2 109.6 110.5 110.8
Debtor days 47.0 49.8 53.1 55.1 57.8 59.4 61.5
Creditor days 40.5 39.3 39.0 36.9 34.8 34.4 34.5
Working capital/Sales (%) 22.3 24.9 25.2 25.5 27.3 27.7 28.3
Capital employed analysis
Sales/Capital employed (%) 200.4 179.5 168.6 156.3 150.8 150.8 149.6
EV/Capital employed (%) 754.3 650.7 583.1 508.1 464.4 424.9 388.1
Working capital/Capital employed (%) 44.8 44.6 42.5 39.9 41.1 41.8 42.3
Fixed capital/Capital employed (%) 47.1 47.5 50.0 52.9 52.3 52.1 52.2
Other ratios (%)
EV/OCF (x) 39.4 39.9 29.0 34.0 33.3 29.5 26.3
EV/FCF (x) 78.1 105.9 57.9 190.8 61.1 53.1 46.9
EV/Sales (x) 3.8 3.6 3.5 3.3 3.1 2.8 2.6
Capex/depreciation (%) 307.0 320.8 368.0 486.8 238.4 277.5 314.4
Source: www.clsa.com

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 Efficiency mode Kalbe Farma - U-PF

Cashflow (Rpbn)
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Operating profit 3,057 3,214 3,314 3,310 3,424 3,771 4,130
Operating adjustments (121) (121) (144) (36) (72) (78) (85)
Depreciation/amortisation 298 356 340 365 420 396 385
Working capital changes (577) (697) (101) (468) (718) (684) (738)
Interest paid / other financial expenses (28) (36) (30) (40) (73) (71) (71)
Tax paid (740) (788) (809) (865) (782) (861) (860)
Other non-cash operating items (40) (94) (61) (102) 0 0 0
Net operating cashflow 1,849 1,834 2,509 2,165 2,199 2,474 2,761
Capital expenditure (916) (1,143) (1,250) (1,779) (1,000) (1,100) (1,210)
Free cashflow 934 691 1,260 386 1,199 1,374 1,551
Acq/inv/disposals - - - - - - -
Int, invt & associate div 132 135 126 138 134 141 154
Net investing cashflow (783) (1,008) (1,124) (1,641) (866) (959) (1,056)
Increase in loans (115) 37 40 459 (20) - -
Dividends (891) (1,031) (1,172) (1,219) (928) (1,185) (1,451)
Net equity raised/others 116 58 115 123 (26) 78 85
Net financing cashflow (889) (937) (1,017) (636) (973) (1,106) (1,366)
Incr/(decr) in net cash 177 (111) 369 (113) 361 408 339
Exch rate movements - - - - - - -
Opening cash 2,719 2,896 2,785 3,153 3,040 3,402 3,810
Closing cash 2,896 2,785 3,153 3,040 3,402 3,810 4,149
OCF PS (Rp) 39.4 39.1 53.5 46.2 46.9 52.8 58.9
FCF PS (Rp) 19.9 14.7 26.9 8.2 25.6 29.3 33.1

Cashflow ratio analysis

Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Growth (%)
Op cashflow growth (% YoY) (21.2) (0.8) 36.8 (13.7) 1.6 12.5 11.6
FCF growth (% YoY) (38.8) (26.0) 82.3 (69.4) 211.1 14.5 12.9
Capex growth (%) 11.6 24.9 9.3 42.3 (43.8) 10.0 10.0
Other key ratios (%)
Capex/sales (%) 4.7 5.7 5.9 7.9 4.2 4.3 4.3
Capex/op cashflow (%) 49.5 62.3 49.8 82.2 45.5 44.5 43.8
Operating cashflow payout ratio (%) 48.2 56.2 46.7 56.3 42.2 47.9 52.6
Cashflow payout ratio (%) 48.2 56.2 46.7 56.3 42.2 47.9 52.6
Free cashflow payout ratio (%) 95.4 149.3 93.0 316.1 77.3 86.2 93.6

DuPont analysis
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Ebit margin (%) 15.8 15.9 15.7 14.6 14.4 14.6 14.7
Asset turnover (x) 1.3 1.3 1.2 1.2 1.1 1.1 1.1
Interest burden (x) 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Tax burden (x) 0.8 0.8 0.8 0.7 0.8 0.8 0.8
Return on assets (%) 16.1 15.3 14.4 12.9 12.6 12.7 13.1
Leverage (x) 1.2 1.2 1.2 1.2 1.2 1.2 1.2
ROE (%) 20.1 18.6 17.1 15.9 15.4 15.5 15.9

EVA® analysis
Year to 31 December 2016A 2017A 2018A 2019A 2020CL 2021CL 2022CL
Ebit adj for tax 2,325 2,432 2,503 2,469 2,656 2,925 3,286
Average invested capital 9,521 10,970 12,291 13,811 15,466 16,808 18,284
ROIC (%) 24.4 22.2 20.4 17.9 17.2 17.4 18.0
Cost of equity (%) 14.0 14.0 14.0 14.0 14.0 14.0 14.0
Cost of debt (adj for tax) 8.4 8.3 8.3 8.2 8.5 8.5 8.8
Weighted average cost of capital (%) 12.9 12.9 12.9 12.8 12.9 12.9 13.0
EVA/IC (%) 11.5 9.3 7.5 5.0 4.3 4.5 5.0
EVA (Rpbn) 1,099 1,021 922 695 660 756 919
Source: www.clsa.com

11 August 2020 merlissa.trisno@clsa.com 9

 
  
 Important disclosures Kalbe Farma - U-PF

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Companies mentioned
Kalbe Farma (KLBF IJ - RP1,600 - UNDERPERFORM)
Ace Hardware (ACES IJ - RP1,650 - O-PF)
AnGes (N-R)
Anhui Zhifei Longcom Biopharmaceutical (N-R)
Arcturus (N-R)
AstraZeneca (N-R)
Bharat Biotech (N-R)
BioNTech (N-R)
Cadila Healthcare (CDH IB - RS394.9 - BUY)
CanSino (N-R)
Clover Biopharmaceuticals Inc (N-R)
CSL (CSL AU - A$280.98 - BUY)
Curevac (N-R)
Dynavax (N-R)
Fosun Pharma (2196 HK - HK$35.80 - SELL)
Genexine (N-R)
GSK (N-R)
Gudang Garam (GGRM IJ - RP51,025 - O-PF)
Indofood (INDF IJ - RP7,050 - U-PF)
Indofood CBP (ICBP IJ - RP10,200 - O-PF)
Inovio Pharmaceuticals (N-R)
Janssen Pharmaceutical (N-R)
Kentucky Bioprocessing, Inc (N-R)
Kimia (N-R)
Matahari Dept Store (LPPF IJ - RP1,260 - SELL)
Mayora Indah (MYOR IJ - RP2,250 - BUY)
Medicago Inc (N-R)
Medigen Vaccine Biologics Corporation (N-R)
Medytox (086900 KS - ₩177,300 - SELL)
Mitra Adiperkasa (MAPI IJ - RP695 - O-PF)
Moderna (N-R)
NIAID (N-R)
Novavax (N-R)
Pfizer (N-R)
Ramayana (RALS IJ - RP625 - SELL)
Sampoerna (HMSP IJ - RP1,705 - U-PF)
Seqirus (N-R)
Sido Muncul (N-R)
Sinopharm (1099 HK - HK$18.94 - BUY)
Sinovac (N-R)
Takara (N-R)
Tempo Scan Pacific (N-R)
Unilever Indo (UNVR IJ - RP8,050 - O-PF)
Vaxine Pty Ltd (N-R)
Walvax Bio (N-R)
Wuhan (N-R)
Zhifei Bio (300122 CH - RMB157.80 - O-PF)

11 August 2020 merlissa.trisno@clsa.com 10

 
  
 Important disclosures Kalbe Farma - U-PF

Analyst certification
The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our
own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will
be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures
Recommendation history of Kalbe Farma Tbk KLBF IJ

Date Rec Target Date Rec Target

LATEST U-PF 1,700.00 08 Jan 2019 U-PF 1,622.00
19 Jun 2020 O-PF 1,700.00 15 Oct 2018 U-PF 1,350.00
11 Apr 2020 U-PF 1,250.00 02 Aug 2018 U-PF 1,400.00
27 Feb 2020 U-PF 1,400.00 29 Jun 2018 O-PF 1,400.00
11 Jan 2020 U-PF 1,700.00 14 May 2018 U-PF 1,500.00
14 Oct 2019 U-PF 1,760.00 14 Feb 2018 U-PF 1,670.00
14 Aug 2019 O-PF 1,660.00 23 Oct 2017 U-PF 1,800.00
14 Feb 2019 O-PF 1,760.00
Source: CLSA

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 Important disclosures
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13