Comprehensive Analysis of HM Sampoerna by Maybank Sekuritas Indonesia

Date: December 4, 2024

Broker: PT Maybank Sekuritas Indonesia

Introduction

In a detailed report by PT Maybank Sekuritas Indonesia, HM Sampoerna (HMSP IJ) is evaluated for its market performance and strategic initiatives. The report, dated December 4, 2024, provides an in-depth analysis of HM Sampoerna’s financial health, ESG efforts, and market strategies. HM Sampoerna, a major player in the consumer staples sector in Indonesia, remains a focal point for investors looking for robust growth and sustainability in their portfolios.

HM Sampoerna: A Deep Dive

Investment Recommendation

The report maintains a “BUY” recommendation for HM Sampoerna with a price target of IDR 850, indicating a potential upside of 39% from its current share price of IDR 655. This recommendation is bolstered by HM Sampoerna’s persistent efforts in maintaining market share and improving its earnings profile.

ESG Initiatives

HM Sampoerna’s ESG score has improved significantly from 41 in FY22 to 54, according to Maybank’s in-house scoring system. This improvement reflects the company’s successful implementation of various ESG initiatives. However, the company’s quantitative ESG score of 24, derived from 17 metrics, remains below the industry average of 50. The report suggests that including women in its board of commissioners and focusing more on tobacco-harm-reduction products like IQOS, VEEV, and Shiro could further enhance their ESG profile.

Financial Performance and Market Strategy

HM Sampoerna’s revenue is projected to grow modestly from IDR 116,959 billion in FY24E to IDR 127,226 billion in FY26E. EBITDA is expected to reach IDR 12,498 billion by FY26E, driven by strategic market-share conservation rather than premium pricing. The company’s focus on smoke-free products aligns with its parent company Philip Morris International’s goal to have 30% of adult consumers switch to smoke-free products by FY25.

Challenges and Opportunities

Despite the positive outlook, HM Sampoerna faces challenges such as the lack of a clear timeline for its long-term ESG goals and potential regulatory risks from government policies on excise tax to control tobacco consumption. Nonetheless, the company has opportunities to improve its ESG score further by enhancing transparency in its environmental goals and leveraging its strategic position to promote tobacco-harm-reduction products.

Financial Metrics and Ratios

The report provides a detailed breakdown of HM Sampoerna’s financial ratios. The company maintains a high dividend payout ratio at 100%, with a forecasted net dividend yield increasing from 6.5% in FY22 to 12.6% in FY26E. The core P/E ratio is expected to decrease from 15.2x in FY22 to 8.0x in FY26E, reflecting potential growth in profitability and efficiency.

Risk Factors

Key risks identified include potential disruption to distribution due to geopolitical factors and increasing health awareness, which could impact sales of traditional cigarettes. However, the company’s strategic shift towards machine-rolled cigarettes and the export of IQOS HEETS sticks to APAC countries without excise tax present significant growth opportunities.

Conclusion

Overall, HM Sampoerna is positioned well for future growth, supported by strategic initiatives and a strong focus on ESG improvements. The report by Maybank Sekuritas Indonesia highlights the company’s robust financial health and strategic direction, making it an attractive option for investors seeking exposure in Indonesia’s consumer staples sector.