[Indonesia] Pharmaceutical

Kalbe Farma Trading Buy

(KLBF IJ) (Maintain)

What a volatile swing TP: IDR1,760

Upside: 10.3%

Mirae Asset Sekuritas Indonesia

Mimi Halimin [email protected]

Uncertainties remain; Despite the significant share price swing, we see no notable fundamental change
Beware of the market’s  Kalbe Farma’s (KLBF IJ) share price fluctuated during the past couple of trading days. It was closed up by
over-reaction 17.7% on Monday (1/11) and then slumped by 4.5% on Tuesday (1/12) and by 6.8% on Wednesday
(1/13), before picking up by +1.9% on Thursday (1/14).
 We believe that such a significant share price swing was triggered by the market’s over-expectation post
the publication of Emergency Use Authorization (EUA) of Sinovac’s COVID-19 vaccine by Indonesia’s
National Agency for Food and Drug Control (BPOM) on Monday (1/11), which we believe has no
significant direct correlation with KLBF’s fundamental performance.
 Despite the share price volatility, we have not seen any significant changes in KLBF’s fundamental
performance so far. Thus, we retain our revenue and net profit forecasts on KLBF.
 We estimate KLBF’s FY20 and FY21 net profit to reach IDR2.6tr (+4.1% YoY) and IDR2.8tr (+6.9% YoY from
FY20F), respectively.

More and more KLBF-Genexine’s GX-19 vaccine and COVID-19 drug GX-17 development still in progress
participation in  Meanwhile, we are encouraged by KLBF’s continuous participation in handling COVID-19 pandemic in
handling COVID-19 Indonesia.
pandemic  Previously, KLBF and Genexine agreed to do clinical trials on GX-19 in Indonesia, together with a
consortium of Genexine, Binex, the International Vaccine Institute (IVI), GenNBio, the Korea Advanced
Institute of Science & Technology (KAIST), and Pohang University of Science & Technology (POSTECH).
 For now, KLBF is still preparing for the second-phase clinical trial of GX-19 COVID-19 vaccine candidate.
 Other than that, Kalbe is also working together with Genexine in developing the COVID-19 drug GX-17
(which just got approval for a phase-2 clinical trial).
 However, we have not factored in the vaccine development into our financial model estimate on KLBF.
We believe that the impact on KLBF’s financial performance will vary, depending on how fast the vaccine
development is and whether KLBF will produce the vaccine locally or just import it and then distribute it
into the market.
 From our perspective, since COVID-19 vaccine is still new, some parts still need further understanding,
e.g. how long the immunity will last and if we need another vaccination after years. We think that
uncertainties over COVID-19 pandemic will linger for quite some time.

Valuation and Maintain Trading Buy with an unchanged target price of IDR1,760
recommendation  We have not seen any notable fundamental changes to KLBF so far, and we still believe that KLBF’s long-
term business prospects remain intact. As KLBF’s share price has normalized down, we maintain our
Trading Buy recommendation and retain our target price of IDR1,760.
 We derive our target price by applying a target P/E of 29.6x (close to 0.4 SD of its 5-year mean P/E of
28.3x) to our 2021F EPS.
Key data
(D-1yr=100)
JCI KLBF Share Price (1/14/21, IDR) 1,595 Market Cap (IDRbn) 74,765.8
120
Consensus NP (21F, IDRbn) 2,912 Shares Outstanding (mn) 46,875.1
110
100 NP Mirae Asset vs. consensus (21F, %) -4.2 Free Float (%) 42.7
90
EPS Growth (21F, %) 6.9 Beta (Adjusted, 24M) 0.9
80
70 P/E (21F, x) 26.8 52-Week Low (IDR) 830
60 Industry P/E (21F, x) 17.7 52-Week High (IDR) 1,960
50
1/20 3/20 5/20 7/20 9/20 11/20 1/21 Benchmark P/E (21F, x) 17.3

Share performance Earnings and valuation metrics

(%) 1M 6M 12M FY () 12/17 12/18 12/19 12/20F 12/21F 12/22F
Absolute 5.4 5.4 -1.3 Revenue (IDRbn) 20,182 21,074 22,633 23,540 25,490 27,160
Relative -1.6 -20.8 -3.0 OP (IDRbn) 3,214 3,213 3,310 3,333 3,544 3,793
OP margin (%) 15.9% 15.2% 14.6% 14.2% 13.9% 14.0%
NP (IDRbn) 2,404 2,457 2,507 2,609 2,790 3,043
EPS (IDR) 51 52 53 56 60 65
ROE (%) 18.1% 16.8% 15.8% 14.9% 14.5% 14.5%
P/E (x) 31.1 30.4 29.8 28.7 26.8 24.6
P/B (x) 5.6 5.1 4.7 4.3 3.9 3.6
Dividend yield (%) 1.6% 1.6% 1.3% 1.6% 1.7% 1.8%
Notes: Net profit refers to net profit attributable to controlling interests
Source: Company data, Mirae Asset Sekuritas Indonesia Research estimates
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
January 15, 2021 Kalbe Farma

Figure 1. KLBF’s 9M20 sales per business segment Figure 2. KLBF’s 9M20 revenue contributors

(IDRbn)

6,000 9M19 9M20

Prescription
22% Pharmaceutical
32% Consumer Health
4,000

Nutritionals
17%
2,000 Distribution and
Logistic
29%

0
Prescription Consumer health Nutritionals Distribution and logistics
pharmaceuticals

Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research

Figure 3. Prescription pharmaceuticals’ sales estimate Figure 4. Consumer health’s sales estimate

(IDRbn) (IDRbn)

6,000 5,000

5,000
4,000

4,000
3,000
3,000
2,000
2,000

1,000
1,000

0 0
2016 2017 2018 2019 2020 (F) 2021(F) 2016 2017 2018 2019 2020 (F) 2021(F)

Source: Company data, Mirae Asset Sekuritas Indonesia Research Estimates Source: Company data, Mirae Asset Sekuritas Indonesia Research Estimates

Figure 5. Nutritionals’ sales estimate Figure 6. Distribution’s sales estimate

(IDRbn) (IDRbn)

8,000 10,000

8,000
6,000

6,000
4,000
4,000

2,000
2,000

0 0
2016 2017 2018 2019 2020 (F) 2021(F) 2016 2017 2018 2019 2020 (F) 2021(F)

Source: Company data, Mirae Asset Sekuritas Indonesia Research Estimates Source: Company data, Mirae Asset Sekuritas Indonesia Research Estimates

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January 15, 2021 Kalbe Farma

Figure 7. KLBF’s revenue estimate Figure 8. KLBF’s net profit estimate

(IDRbn) (YoY, %) (IDRbn) (YoY, %)

30,000 Revenue Revenue growth - RHS 10% 3,000 Net profit Net profit growth - RHS 20%

25,000 8% 2,500
15%
20,000 2,000
6%
15,000 1,500 10%
4%
10,000 1,000
5%
5,000 2% 500

0 0% 0 0%
2016 2017 2018 2019 2020 (F) 2021 (F) 2016 2017 2018 2019 2020 (F) 2021 (F)

Source: Company data, Mirae Asset Sekuritas Indonesia Research Estimates Source: Company data, Mirae Asset Sekuritas Indonesia Research Estimates

Figure 9. KLBF’s forward P/E band

(x)
40

+ 2 SD
35

+1 SD
30
mean

25 -1 SD

-2 SD
20

15
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21

Source: Bloomberg (as of Jan 8, 2021), Company data, Mirae Asset Sekuritas Indonesia Research Estimates

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January 15, 2021 Kalbe Farma

Kalbe Farma (KLBF IJ)

Income Statement (Summarized) Balance sheet (Summarized)

(IDRbn) 12/19 12/20F 12/21F 12/22F (IDRbn) 12/19 12/20F 12/21F 12/22F
Revenue 22,633 23,540 25,490 27,160 Cash 3,040 4,389 4,738 5,627
Cost of Goods Sold 12,390 13,051 14,172 14,947 Trade Receivables 3,573 3,676 3,981 4,241
Gross Profit 10,243 10,489 11,319 12,213 Inventories 3,738 4,112 4,465 4,709
Operating Expenses -6,933 -7,156 -7,775 -8,420 Other CA 871 800 867 923
Operating Profit 3,310 3,333 3,544 3,793 PPE 7,666 8,257 8,994 9,480
Pretax Profit 3,403 3,403 3,636 3,863 Other Non-CA 1,376 989 1,071 1,141
Income Tax -865 -763 -815 -789 Total Assets 20,265 22,223 24,115 26,123
Non-Controlling Interest 31 31 31 31 Trade Payables 1,216 1,359 1,475 1,556
Net Profit 2,507 2,609 2,790 3,043 ST loans + CPLTD 169 181 192 204
Total CL 2,577 2,858 3,095 3,281
Profitability ratio Long-term debt 648 659 670 681
Gross Profit Margin 45.3% 44.6% 44.4% 45.0% Total Liabilities 3,559 3,846 4,122 4,342
Operating Profit Margin 14.6% 14.2% 13.9% 14.0% Common Stock 469 469 469 469
Net Profit Margin 11.1% 11.1% 10.9% 11.2% Paid in Capital -34 -34 -34 -34
Return on Equity 15.8% 14.9% 14.5% 14.5% Retained Earnings 15,361 17,033 18,649 20,437
Return on Asset 12.4% 11.7% 11.6% 11.7% Non-Controlling interest 812 812 812 812
Equity (ex minority) 15,893 17,565 19,181 20,969

Cash Flow (Summarized) Key valuation metrics/ratios

(IDRbn) 12/19 12/20F 12/21F 12/22F 12/19 12/20F 12/21F 12/22F
Operating Cash Flow P/E (x) 29.8 28.7 26.8 24.6
Net income 2,507 2,609 2,790 3,043 P/B (x) 4.7 4.3 3.9 3.6
Depreciation 364 409 463 513 EV/EBITDA (x) 18.3 17.7 16.4 15.1
Changes in operating accounts EPS (IDR) 53 56 60 65
∆ in trade receivables 317 103 305 261 BPS (IDR) 339 375 409 447
∆ in inventories 263 374 353 244 DPS (IDR) 20 25 27 29
∆ in others CA 106 -71 66 57 Payout ratio (%) 37.4% 45.0% 45.0% 45.0%
∆ in trade payable -74 143 117 81 Dividend Yield (%) 1.3% 1.6% 1.7% 1.8%
∆ in short term debt 72 12 12 12 Revenue growth (%) 7.4% 4.0% 8.3% 6.6%
∆ in accrued expense 156 55 39 33 GP growth (%) 4.0% 2.4% 7.9% 7.9%
∆ in others CL 137 71 70 60 OP growth (%) 3.0% 0.7% 6.3% 7.0%
CFO 2,475 2,893 2,767 3,181 EBITDA growth (%) 4.4% 1.6% 7.2% 7.4%
Investing Cash Flow NP growth (%) 2.0% 4.1% 6.9% 9.1%
∆ in PPE 1,778 1,000 1,200 1,000 AR turnover (x) 6.6 6.4 6.4 6.4
Others 131 -387 82 70 Invt. turnover (x) 3.4 3.2 3.2 3.2
CFI -1,909 -613 -1,282 -1,070 AP turnover (x) 9.9 9.6 9.6 9.6
Financing Cash Flow ROA (%) 12.4% 11.7% 11.6% 11.7%
∆ in other liability 29 -5 27 23 ROE (%) 15.8% 14.9% 14.5% 14.5%
∆ in equity 1,237 938 1,174 1,255 Gearing
∆ in minority interest 141 0 0 0 Total debt (IDRbn) 817 839 862 884
CFF -679 -931 -1,136 -1,221 Debt/equity (%) 5.1% 4.8% 4.5% 4.2%
Net cash -113 1,349 349 889 Net cash (IDRbn) 2,224 3,550 3,876 4,743
beginning balance 3,153 3,040 4,389 4,738 Net debt/equity (%) Net cash Net cash Net cash Net cash
ending balance 3,040 4,389 4,738 5,627
Source: Company data, Mirae Asset Sekuritas Indonesia Research estimates

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January 15, 2021 Kalbe Farma

APPENDIX 1

Important Disclosures & Disclaimers

2-Year Rating and Target Price History
Company (Code) Date Rating Target Price (IDR) KLBF Analyst's TP
KLBF IJ 1/15/2021 Trading Buy 1,760
1/11/2021 Under review 2,200
7/23/2020 Trading Buy 1,760
5/4/2020 Trading Buy 1,650 1,700
4/6/2020 Trading Buy 1,380
2/28/2020 Trading Buy 1,460 1,200
12/5/2019 Trading Buy 1,800
11/1/2019 Trading Buy 1,890 700
4/2/2019 Trading Buy 1,745 Jan-19 Jan-20 Jan-21

2/15/2019 Trading Buy 1,800

Stock Ratings Industry Ratings

Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at PT Mirae Asset Sekuritas Indonesia, we may call a trading opportunity in case there is a technical or short-term
material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future
earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.

Equity Ratings Distribution

Buy Trading Buy Hold Sell
Equity Ratings Distribution 57.45% 25.53% 14.89% 2.13%
* Based on recommendations in the last 12-months (as of December 31, 2020)

Disclosures
As of the publication date, PT Mirae Asset Sekuritas Indonesia and/or its affiliates do not have any special interest with the subject company and do not own 1% or
more of the subject company's shares outstanding.

Analyst Certification
Opinions expressed in this publication about the subject securities and companie s accurately reflect the personal views of the Analysts primarily
responsible for this report. Except as otherwise specified herein, the Analysts have not received any compensation or any oth er benefits from the subject
companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was,
is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of PT Mirae Asset
Sekuritas Indonesia, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenue s from, among other business
units, the institutional equities, investment banking, proprietary trading and private clie nt division. At the time of publication of this report, the Analysts do
not know or have reason to know of any actual, material conflict of interest of the Analyst or PT Mirae Asset Sekuritas Indon esia except as otherwise stated
herein.

Disclaimers
This report is published by PT Mirae Asset Sekuritas Indonesia (“Mirae Asset”), a broker-dealer registered in the Republic of Indonesia and a member of the
Indonesia Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such
information has not been independently verified and Mirae Asset makes no guarantee, representation or warranty, express or im plied, as to the fairness,
accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Bahasa Indonesia. If
this report is an English translation of a report prepared in the Indonesian language, the original Indonesian language repor t may have been made
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subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments
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January 15, 2021 Kalbe Farma

guaranteed, and a loss of original capital may occur.

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