Ultrajaya Milk Industry Bloomberg: ULTJ.IJ Reuters: ULTJ.JK

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1 Company Update Ultrajaya Milk Industry Bloomberg: ULTJ.IJ Reuters: ULTJ.JK Samuel Equity Research 17 Februari 216 Continuing Improvement Pelemahan harga susu bubuk yang disebabkan salah satunya oleh penurunan permintaan dari China, kami lihat akan memberikan benefit pada kinerja operasional ULTJ tahun ini. Rendahnya harga susu bubuk dibarengi dengan potensi berlanjutnya penguatan nilai tukar rupiah serta peningkatan daya beli masyarakat menjadi tiga katalis utama yang kami harapkan akan mendorong ULTJ untuk membukukan peningkatan pendapatan setara dengan angka proyeksi kami. Kami juga masih menjadikan rendahnya tingkat konsumsi susu per kapita dan kekuatan ekuitas merek ULTJ sebagai dua kekuatan utama penggerak pertumbuhan marjin kedepannya. Kami mempertahankan sudut pandang positif kami pada kinerja ULTJ FY16 dan memberikan rekomendasi BUY dengan target harga DCF 12M sebesar Rp4,8/lembar saham (16E PE 2.9x dan 16E PBV 5.x). Ekspektasi penguatan marjin. Catatan perbaikan kinerja marjin laba kotor ULTJ sejak 1H15 kami perkirakan akan terus berlanjut, utamanya didorong oleh masih rendahnya harga susu bubuk dunia hingga akhir Jan16. Harga susu bubuk telah mengalami penurunan tajam hingga mencapai sebesar -65% dari titik tertingginya sejak Apr13, seiring dengan pelemahan permintaan dari China sebagai pengimpor susu terbesar di dunia. Kondisi tersebut kami perkirakan masih akan berlanjut hingga akhir tahun ini dan akan mendorong potensi kenaikan marjin laba kotor ULTJ sebesar 17% sehingga mengakibatkan meningkatnya marjin laba operasi sebesar 6bps dan marjin laba bersih sebesar 4bps. Rencana ekspansi pabrik untuk menjaga ketersediaan suplai susu. Salah satu cara untuk meredam volatilitas harga susu di pasar adalah dengan mengatur ketersediaan suplai sapi. Kami melihat ULTJ cukup responsif di dalam mengatasi resiko keterbatasan suplai, salah satunya melalui pengembangan peternakan di Berastagi, Sumatera Utara. Pasca beroperasinya peternakan tersebut tahun ini, kami memperkirakan setidaknya akan terdapat penambahan sebanyak 23. kapasitas head farm dari 12. ekor sapi dan mendorong volume produksi susu naik sebesar 5% tahun ini. Menanti kinerja FY15. Sambil menunggu keluarnya laporan keuangan FY15, kami masih mempertahankan rekomendasi dan target harga terakhir kami (lihat yearbook 12/1/15). Namun, tidak menutup kemungkinan bagi kami untuk menaikkan target harga apabila hasil kinerja FY15 melebihi ekspektasi kami. Maintain BUY. Kami meyakini permintaan susu masih akan bertumbuh kedepannya, didukung oleh: (1). Potensi berlanjutnya kenaikan daya beli konsumen (2). Masih rendahnya tingkat konsumsi susu di Indonesia (13.4 liter per kapita per tahun vs ratarata negara ASEAN sebesar 2 liter per tahun) dan (3) Jumlah kelas menengah masyarakat Indonesia yang terus meningkat. Kami memproyeksikan pendapatan ULTJ akan bertumbuh sebesar 15%YoY dengan kenaikan laba bersih sebesar 18.3%YoY Kekhawatiran kami terletak pada : (1) Pelemahan nilai tukar rupiah (2) Membaiknya permintaan susu bubuk dari China (3) Pertumbuhan volume penjualan dibawah ekspektasi (4) Meningkatnya persaingan minuman susu dalam kemasan (5) Likuiditas saham. Forecast and Valuation (at closing price Rp3,7 per share) Target Price Rp 4,8 Last price Rp 3,7 Potential Upside 29.7% JCI Index 4,745 Share issued (mn) 2,888 Market Cap. (Rpbn) 1, Weeks High/Low 4,3/3,46 Avg Daily Vol (mn).6 Free Float 45.1% Nominal Value Rp 2 Book value/share 16 Rp 96 Relative to JCI Chart BUY (Maintain) ULTJ 7 Nov-9 Nov-1 Nov-11 Nov-12 Nov-13 Nov-14 Nov-1 Company Background JCI PT Ultrajaya Milk Industry and Trading Company operates in the food and beverage industry. The Company produces aseptic drinks such as liquid milk andtea, fruit juices and health drinks. Ultrajaya also produces butter, pow der milk and sw eet condensed milk. Shareholder Structure PT Praw iraw idjaja Prakarsa 21% Sabana Praw iraw idjaja 15% Indolife Pensiontama 8% PT AJ Central Asia Raya 8% Public 45% Y/E Dec (Rpbn) 14A 15E 16E 17E Sales 3,917 4,426 5,9 5,955 EBITDA ,12 Net Profit EPS (Rp/shr) Dividend Yield (%) BV per share (Rp/shr) ,158 EV/EBITDA (x) P/E Ratio (x) P/BV Ratio (x) Marlene Tanumihardja marlene@samuel.co.id Page 1 of 7 DISCLAIMER: Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst(s) principally responsible for the preparation of this research has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.

2 People (Mn) Ultrajaya Milk Industry Figure 1. Consumer Confidence Index Source: IDCCI, Bloomberg Figure 2. Indonesia Consuming Class (GDP: 5-6%) 23 (GDP 7%) Below Consuming Class Consuming Class Source: Mc Kinsey Figure 3. Milk Consumption per Capita (Liters per Annum) Indonesia Philippines Thailand Malaysia Source: Company data Page 2 of 7

3 Figure 4. White Milk Powder and Skimmed Milk Powder Price (US$/MT) WMP SMP 6, 5, 4, 3, 2, 1, Source: Bloomberg Figure 5. Avg. milk powder prices for US$/ton and Rupiah/kg Aug 11 Jan 16 US$/ton (LHS) Rupiah/kg (RHS) 6, 5, 4, 3, 2, 1, 7, 6, 5, 4, 3, 2, 1, Source: Bloomberg Figure 6. Revenue growth, est. production growth, net margin E Revenue growth Est. sales volume growth Net margin 35.% 3.% 25.% 2.% 15.% 1.% 5.%.% E 216E 217E Source: SSI estimates, Company data Page 3 of 7

4 Figure 7. Avg. milk powder cost Rp/kg vs. ULTJ gross margin up to 3Q15 (in Rpbn) 3Q14 2Q15 3Q15 YoY QoQ 9M14 9M15 YoY 9M15A/ FY15E SSI Revenue 978 1,151 1, % -5.4% 2,882 3, % 74.% COGS (739) (85) (748) 1.2% -7.1% (2,212) (2,251) 1.8% Gross Profit % -1.4% 67 1, % 74.3% Total Operating Exp. (158) (251) (137) -13.3% -45.4% (435) (541) 24.3% Operating Profit % 115.2% % 72.2% Other Income - Net % Net interest income (expense) Share of net income associated (1) (6) (4) (15) (12) Other income (expense) Pre-tax Income % 117.2% % Tax (expense) (28) (23) (49) (67) (116) Minority interest (1) (3) (3) 1 (8) Net Income % 121.6% % 74.5% Segment Highlights Revenue UHT 984 1,127 1, % -2.1% 2,799 3, % Non-UHT % -58.7% % Elimination (31) (45) (42) (84) (128) 51.5% Total 978 1,151 1, % -5.4% 2,882 3, % Profitability Gross margin 24.5% 3.1% 31.3% 23.2% 31.3% Operating margin 8.3% 8.2% 18.7% 8.2% 14.7% Net margin 8.3% 6.6% 15.6% 7.2% 12.% Source: Bloomberg Figure 8. Avg. milk powder cost Rp/kg vs. ULTJ gross margin up to 3Q15 Gross margin (RHS) Avg. milk powder cost Rp/kg (LHS) 6, 35.% 5, 4, 3, 2, 1, 3.% 25.% 2.% 15.% 1.% 5.% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15.% Source: Company data, Bloomberg Page 4 of 7

5 Figure 9. Indonesia consumer valuation table as of close 16 February 216 (excluding UNVR) Company Last Target Market cap. PE (x) PEG PBV (x) ROE EPS CAGR price price (Rp bn) 15E 16E (x) 15E 16E 15E 14A-16E Unilever Indonesia (UNVR IJ) 41,5 39, 316, % 6% Kalbe Farma (KLBF IJ) 1,295 1,61 6, % 12% Indofood CBP (ICBP IJ) 15,5 15,6 9, % 23% Indofood SM (INDF IJ) 6,6 7,4 57, (8.7) % -2% Ultrajaya Milk (ULTJ IJ) 3,7 4,8 1, % 46% Nippon Indosari Co. (ROTI IJ) 1,32 1,5 6, % 15% Weighted average* (.4) % 18% Source: SSI estimates, Bloomberg (*Excl. UNVR, except for PE ratio & EPS CAGR) Figure 1. ULTJ s forward PE Band Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Average ST dev +1 ST dev -1 PER - Roll ST dev +2 ST dev -2 Source: SSI estimates, Bloomberg Page 5 of 7

6 Key Financials Profit and Loss Statement Cash Flow Rpbn 14A 15E 16E 17E Rpbn 14A 15E 16E 17E Revenue 3,917 4,426 5,9 5,955 Net Income COGS (2,98) (3,49) (3,475) (4,6) Depreciation & amortization Gross profit 937 1,377 1,615 1,895 Working capital (315) (54) (13) (15) Gross margin (%) Operating cash flow Operating profit Net - Capital expenditure (177) (15) (3) (315) Operating margin (%) Other assets 8 (58) (1) (122) EBITDA ,12 Investing cash flow (168) (28) (4) (437) EBITDA margin (%) Net - Borrow ings (29) (14) (2) (22) Other income (expenses) Other financing (41) (19) (53) (62) Pre-tax profit Financing cash flow (7) (33) (73) (84) Income tax - net (92) (179) (212) (253) Net - Cash flow (122) Net profit Cash at beginning ,159 Net profit margin (%) Cash at ending ,159 1,458 Balance Sheet Key Ratios Yr-end Dec (Rpbn) 14A 15E 16E 17E Yr-end Dec 14A 15E 16E 17E Cash & ST investment ,159 1,458 ROE (%) Receivables ROA (%) Inventories Revenue grow th (%) Others EBITDA grow th (%) (18.2) Total current assets 1,642 2,13 2,446 2,92 EPS grow th (%) Net fixed assets 1,3 1,12 1,156 1,294 Interest coverage (x) n/a n/a n/a n/a Other assets Debt to equity (%) Total assets 2,917 3,445 4,32 4,747 Net gearing (%) -17.8% -28.4% -32.8% -35.1% Payables ST. debt and curr. maturity Other current liabilities Major Assumptions LT. debt Yr-end Dec 14A 15E 16E 17E Other long term liabilities ASP grow th est (%) Total liabilities Average Rupiah/US$ 11,885 13,5 13,6 13,2 Total equity 2,265 2,774 3,346 4,31 Milk pow der cost (US$/ton) 3,547 2,588 2,328 2,14 Recommendation History Ultrajaya Milk Industry (ULTJ) Date Recommendation Close Price Target 6-Aug-15 Buy 3,9 4,8 12-May-15 Buy 4,3 4,8 9-Apr-15 Hold 3,995 4, 7-Nov-14 Buy 3,8 4,525 4-Jul-14 Buy 4,5 4,47 17-Apr-14 Buy 4,4 5,3 21-Jan-14 Buy 4,475 5,3 11-Jun-13 Buy 3,875 4,525 Page 6 of 7

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