CIMB Gudang Garam Result note - Returning with higher margins

(GGRM IJ / GGRM.JK, OUTPERFORM - Maintained, Rp27,600 - Tgt. Rp35,000, Consumer)

Maintain Outperform on Gudang Garam. 1Q10 core earnings were up 22% yoy, in line with our expectation (only 1 and 13% above our forecast and consensus, respectively). Flat margins did not surprise as a hike in excise duty kicked in 1Q10 and ASP increases were kept to the minimum. We maintain our forecast as we expect margin improvements throughout the year on the back of progressive ASP increases. Maintain Outperform and target price of Rp35,000, still set at 13.4x CY11 earnings. We see stock catalysts from further sets of strong results.