Sido Muncul's Shares Are Still Interesting

Photo: Doc. Sido Muncul

JAKARTA - Shares of PT Industri Jamu and Pharmacy Sido Muncul Tbk (SIDO) are still considered attractive, especially with the achievement of a net profit during the first semester of 2024 worth IDR 608 billion.

Stockbit Sekuritas in its research said that this achievement was relatively in line with expectations because it was equivalent to 55/53 percent of the FY24F estimate from Stockbit/consensus.

"SIDO's quarterly performance on 2Q24 was the normalization of its very high performance on 1Q24, although it still grew significantly on an annual basis thanks to the low-base effect last year," the Stockbit review said Thursday, July 25.

Stockbit estimates that SIDO's performance at 2H24 will not be as high as 1H24, so they maintain their estimated net profit of FY24 at the level of IDR 1.1 trillion.

"Meski demikian, realisasi kinerja SIDO selama FY24 berpeluang melebihi estimasi kami jika permintaan produk perseroan pada 2H24 melonjak seiring potensi curah hujan tinggi akibat La Nina. Manajemen sendiri mempertahankan guidance pertumbuhan pendapatan dan laba bersih sebesar mininum 10% untuk tahun ini," ungkap Stockbit.

According to Stockbit, SIDO's performance at 2Q24 is still solid with sales growth of +13 percent yoy and a higher gross profit margin at the level of 56.8 percent (vs. 2Q23: 52.8 percent) thanks to the decline in raw material prices.

The F&B segment continues its fast growth trend with sales growing +21 percent yoy, so its contribution now reaches 38 percent of the company's total revenue on 2Q24 (vs. 2Q23: 35.4 percent).

According to SIDO management, extreme hot weather that occurred in the Southeast Asia region is one of the factors that encourage demand for energy drink - especially in Malaysia - in addition to the increasing number of workers in the construction sector in the country.

Stockbit said, SIDO management is quite confident that the gross profit margin can last at a high level at 2H24 (vs. 1H24: 58.2 percent; 1H23: 53.1 percent), supported by an increase in raw material stock when the price is low at 2Q24.

In addition, the direct distribution initiative to Alfamart and Indomaret which starts at 2H24 will also have a positive impact on margins. In terms of operational expenses (opex), advertising and promotion costs - which are equivalent to 9.5 percent of total revenue at 1H24 - have the potential to be maintained or even increased, given the company's need to continue to deepen penetration in the export market.

With a significant increase in share prices of +41 percent ytd -- and even almost touching Rp800 per share recently -- Stockbit assesses that the upside offered by SIDO is relatively limited (limited upside) in the near future. This is because positive factors have been reflected in stock prices, one of which is an increase of +11 percent in the estimated net profit of FY24F from consensus in the last 3 months.

Stockbit also assessed that the valuation of SIDO's shares is now at a level that is no longer cheap (P/E 2024F: 19x). However, for long-term investors, Stockbit still likes SIDO's future growth prospects, especially in the export market (sales grew +73 percent yoy with an 8 percent contribution to 1H24).

"The dividends offered are also quite interesting. Assuming a dividend payout ratio of 95%, we estimate SIDO's dividend yield from the 2024 financial year to reach 4.8 percent," explained Stockbit Sekuritas.