Mandiri Sekuritas MYOR: Stunning performance

Beyond our expectations, Mayora Indah (MYOR) delivered robust earnings growth of 89.7% yoy in FY09 to Rp372bn. This is largely backed by its coffee products, of which sales sprang up by 29.6% yoy (vs. confectionary products of 16.1%). New capacity and improving purchasing power were providing ground for strong performance last year, and so will this year in our view. Therefore, we think company’s sales will likely grow to Rp5.6tn (+17.1% yoy) in 2010. However, factoring still-h! igh sugar prices (hovering at US$cents20/lb), we foresee company’s gross margin to be modest at 22.5%, compared to 23.7% previously. At our earnings estimates, the company is currently trading at attractive valuation of 7.7x PER10F. Maintain Buy with TP of Rp5,000/share.

FY09 result: surpassed our and consensus expectation. Mayora delivered high earnings growth of 89.7% yoy and 0.4% qoq to Rp372bn in FY09. Top-line figure is within ours and consensus estimates, whereas bottom-line is significantly above our and consensus estimates. Stronger rupiah exchange rate also helped to boost gross margin in 4Q09 (25.3% vs 3Q09 of 25.2%) which brought FY09 margin to 23.7%, slightly higher than company’s previous indication of 23%. However, operating margin dropped in 4Q09 which mainly due to significantly higher G&A expenses. G&A e! xpenses j umped 3-folds on qoq basis to Rp74bn in 4Q09. We think this is largely due to salaries and bonuses which were booked in 4Q09.

Resilient demand continues. We remain positive on company’s sales growth this year, on the back of: 1) another 15% increase in their plant capacity mainly biscuit and coffee products, and 2) improving consumer purchasing power, in line with better economic outlook (2010F GDP growth of 5.2% vs 2009 of 4.3%). Hence, we foresee FY10F sales to improve by 17.1% to Rp5.6tn. This is largely backed by volume growth of 15%, in line with the increased capacity.

However, soaring sugar price will likely offset margin enhancement. In spite of FY10F), still-high sugar price will likely offset margin enhancement. According to our optimistic assumption on rupiah exchange rate (Rp9,112/US$ on average as at Bloomberg data, sugar price has been traded at UScents25.5/lb during 1Q10, or up by 87.5% yoy. Thus, as sugar constitutes some 25% of total raw material ! prices, we anticipate lower margin of 22.5% this year, from 23.7% previously. This translates to an 8.1% earnings growth to Rp402bn, according to our estimates.

TP maintained at Rp5,000/share. At current price, Mayora is trading at PER10F of 7.7x, a chunky discount relative to consumer companies’ average PER10F of 19.1x. With such an attractive valuation, we retain our Buy call for the stock with TP of Rp5,000/share (DCF-based valuation, WACC: 12.9%, TG: 5.0%), implying PER10F of 9.5x.