SIDO - Weak 1H23 results

Industri Jamu dan Farmasi Sido Muncul (SIDO) reported lower performance qoq in 2Q23 with revenue of IDR746 bn (+2% yoy/-17.7% qoq) on the back of less working days and softer consumer spending during Lebaran. Note that, inventory restocking by distributors was done in 1Q23 or prior Lebaran' month. Segments revenue in 2Q23; a) Medicine & supplement (Herbal) at IDR450 bn (-2.1% yoy/-18.6% qoq), b) F&B at IDR264 bn (+12% yoy/-20% qoq) and c) Pharmacy at IDR31.9 bn (-11% yoy/+36.8% qoq). As a result, SIDO 1H23 revenue grew by 2.6% yoy and came below consensus expectations (39% of cons). SIDO' gross margin expanded yoy by 150bps but contracted qoq by 50bps in 2Q23 as gross margin from Herbal segment expanded yoy by 200bps but contracted qoq by 120bps. All in all, SIDO' 2Q23 net profit declined by 1.8% yoy/50% qoq, which came below consensus (36.7% of cons) and net margin contracted qoq/yoy to 19.8% due to higher opex and forex loss in 2Q23. In the meeting, SIDO explained that the company took a conservative stance and guided for a flattish yoy performance in 2023 for normal scenario. SIDO also shared a worst scenario whereas the company guided for a 10% yoy lower performance on the back of company' anticipation on slower than expected consumer spending in 2H23. SIDO' current share price is at IDR685 and based on consensus EPS, SIDO is currently trading at 16.2x ‘23F P/E, or slightly below its 5-year historical mean of 18.14x. (Source : Company, KBVS Research)