MAYORA INDAH TBK Growth and Profitability Remain Intact

3rd Quarter results are encouraging
As of September 2010, Mayora has booked total sales of Rp 5,123 billion, up 43.7% compared to the 3rd quarter sales in 2009. Net profit also increased by 20.1% YOY to Rp 322 billion. Mayora has benefited from strong domestic consumption, particularly during the Ramadhan period. We expect sales to grow strongly in the 4th quarter, approaching Christmas, thus we have upgraded our estimated FY2010
revenue to Rp 6,688 billion.

Going strong internationally
As of 3Q2010, Mayora’s export sales amounted to Rp 1,470 billion, and accounted for 28.7% of total revenue. Export sales contribution to total revenue has grown strongly, considering in 2005, export sales only made up 5% of the total revenue. The rise in export sales shows that Mayora has been successful in penetrating the international market, and that it has competitive and quality products to compete
globally. Currently, Mayora’s key export product is Kopiko, its famous coffee candy product, which is now available in over 50 countries, and Torabika Coffee. In future, growing export sales will help boost Mayora’s revenue and profile internationally.

Possible margin reduction
Mayora’s profit margin has been under pressure particularly due to the rise in the company’s cost of raw materials such as wheat (+25.6%), coffee (+71.9%), sugar (+40.4%) and CPO (±41%), and the rise in operating cost mainly due to the higher marketing cost. As of 3Q2010, marketing cost reached Rp 425 billion, almost double the marketing cost in the same period last year, as Mayora looks to maintain or even increase its market share domestically and also internationally. Cost of raw materials made up almost 67% of total sales whilst marketing cost made up around 6.8% of total sales. Therefore, Mayora’s margin will decline if the rise in these two costs is not offset by a proportionate price increase. We forecast net profit margin to be in the region of 6.5%-7% for 2011

Maintaining BUY recommendation
Based on Mayora’s strong performance up until 3Q2010, we have raised our estimate for FY2010 revenue to Rp 6,688 billion, and raise our revenue growth forecast from 22% CAGR to 27% CAGR by 2012. Profit margin is forecast to be within 6.7%-7.1% range, due to the strength in the commodities price and increase in competition. As a result, we have upgraded our previous target price to Rp 13,400.