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Senin, 24 Januari 2011

Mandiri Sekuritas ICBP: Price increase by 11%yoy


Our previous report stated that a potential upside for ICBP is if it increases ASP by more than 5%yoy. Our recent observation has just revealed that ICBP’s noodle ASP has increased by some 7-8%, or equivalent to around +11%yoy. Therefore, we upgraded our FY11F net income by 30.9% from our previous estimates. We view that the company’s  decision to increase its ASP higher than it usually did since 2009 reflected its confidence on easing  competition. However, we chose to wait and see whether the company could maintain its sales volume. Therefore, we upgraded th! e stock b y only one notch to Neutral while observing competitors’ responses. The stock is currently trading at PER11-12F of 13.8x-12.4x.

Fostering profitability.  Our recent observation on retailers shows that ICBP’s instant noodle ASP has increased by some 7-8% on average. Note that this ASP increase will fully take into effect in 2011 as it happened in the beginning of this year, unlike previous ASP increase that occured late in 4Q10. Therefore, even though the ASP increased by only 7-8% from the previous ASP, the effective increase is around 11%yoy, assuming the company m! aintains the new ASP throughout this year. Because our previous assumption on ASP increase was lower (only 5.0%yoy), this above-expectation ASP increase could translate to an additional net income of Rp443bn or 30.9% above our previous estimates.

Stronger confidence level.  An interesting point here is the recent ASP adjustment was higher than the company usually did since 2009. In our view, it reflects the company’s higher confidence level regarding easing industry competition landscape. However, at the end, the company’s 1Q11 sales volume prove whether the company could sustain its sales volume.

Upgrade to Neutral. Our DCF valuation with 12.0% WACC and 5.0% TG rate results in ICBP’s fair value of Rp4,800/share. We upgraded the stock to Neutral while observing ICBP’s competitors’ responses that will be reflected in ICBP’s 1Q11 sales volume data. The stock is currently trading at PER11-12F of 13.8-12.4x. Main risks faced by ICBP is further raw material cost increases, competitors’ behaviour, and related-party transaction risks.  
Posted by Saham Pilihan at 15.10

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