Ultrajaya Milk Industry and Trading ULTJ IJ -Buy- July sales jump
Based on our survey of FMCG wholesalers and distributors, we reckon that ULTJ booked very strong sales growth
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Mayora Indah MYOR IJ Buy - Indonesia superior multinational company
Food Beverages n Tobacco SH JW SC 3.5K 12th Aug, 2024
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Expanding and dominating export market
MYOR is one of the biggest and fastest-growing FMCG exporters among listed firms in Indonesia, boasting a 2009-2023 sales CAGR of +21%. MYOR’s export sales always have grown positively every single year, except in 2020 during Covid. Currently, MYOR export sales have reached 44% of total sales (vs 20% in 2009). Interestingly, MYOR has successfully become the market leader in several export destination countries, such as the Philippines (instant coffee and breakfast cereal), China (butter cookies), Lebanon (instant coffee), and Thailand (biscuits). We note there are five key competitive advantages that have driven MYOR's export sales growth: 1) superior management capability to drive aggressive and agile business initiatives as well as a willingness to take risks; 2) superior products quality with competitive pricing, backed by strong internal R&D and supply chain networks; 3) vast distribution networks and knowledges; 4) creative global marketing strategy; and 5) strong financial position to support growth. Hence, we believe the company can sustain its positive export sales growth going forward.
Champion in domestic market
MYOR also continues to strengthen its domination in the domestic market, especially in biscuits (42.4% market share in 2023 vs. 27.7% in 2015), wafer (22.6% shares in 2023 vs. 5.1% in 2015), and breakfast cereal (69% shares in 2023) categories. In Indonesia, MYOR can sell export quality product with very competitive pricing, which creates a high barrier to entry for newcomers. On top of that, the company also has one of the largest store coverage levels (we estimate it at ~1mn point of sales coverage), driven by extremely strong general trade distribution (85% of MYOR sales). All in all, we predict the company will continue to gain more share, especially in the wafer category, as our channel checks show that its close competitors have weakened. On top of that, the spike in coffee and cocoa prices in 2Q24 should also accelerate MYOR’s market share expansion, as the company mentioned that it gained market share in Jun-24 on the back of its stronger balance sheet and pricing power.
Valuation is too cheap, maintain strong BUY call
In our view, MYOR is a superior multinational company with 2009-2023 earnings CAGR of 17%, and currently the stock is only trading at 15.3x FY25F P/E. We rate the shares a Buy at a TP of IDR3,800 using a FY25F P/E target of 26.5x. Downside risks would be weaker-than-expected buying power and a tougher competitive landscape.
Fig. 1: FMCG overseas sales size (IDRbn)
Fig. 2: MYOR’s export sales growth trend
Fig. 3: Biscuits and wafer domestic market share trend
Fig. 4: MYOR P/E vs ROE trend
Fig. 5: MYOR ownership structure
Fig. 6: MYOR P/E band
INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).
This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.
The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.
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ANALYST CERTIFICATION
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| Rating Remains | Buy |
| Target price Remains | IDR 3,800 |
| Closing price 9 August 2024 | IDR 2,550 |
Indonesia Research Team
Sandy Ham (sandy.ham@verdhana.id),
Jody Wijaya (jody.wijaya@verdhana.id) &
Samuel Christian (samuel.christian@verdhana.id)
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