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Feb 06,2017 14:21:52

Sri Rejeki Isman eyes USD760m revenue in 2017

Sri Rejeki Isman ($SRIL) eyes USD760m revenue in 2017. According to is Corporate Secretary Welly Salam, there are three main efforts to boost sales this year, including normalisation of production capacity over new factory that slated to be commencing in mid-this year, product diversification, as well as focus on sales of high value products. This year, the company will be more conservation on its capex plan, allocating only USD15m in 2017 from USD60m in 2016. The capex would be used for maintenance purpose. (Kontan)

Nov 08,2016 18:19:42

Sri Rejeki Isman ($SRIL): Promising long-term growth

§9M16 net profit up 17.2% y-y on improving margins: Due to increased contribution from its high value made-to-order products (Finishing: 24% with 25% GPM and Garment: 24% with 32% GPM) to 48% of total sales, vs. 41% in 9M15, SRIL reported 3Q16 net profit of USD13mn (-20% q-q, +17.2% y-y), around 6% higher than our forecast as margin expanded more than 150bps at the GP level. This brought 9M16 net profit to USD45mn (+17.2% y-y), representing 73% of our forecast and 82% of consensus’ projection.

§Weak revenue on seasonality post Lebaran: The management indicated that the weak quarterly performance was due to the 1-week holiday pre and post Lebaran where trucks were prohibited from being operational, causing the company to be unable to ship their products to customers.

§Targeting 2016 revenue growth of c.8% y-y and c.15% y-y in net profit: Management is confident to achieve its 2016 revenue target growth of around 8% y-y since the production lines are fully booked until the end of the year. With margin expansion, management is targeting solid NP growth of around 15% y-y.  

Outlook: 2017 – Maintain higher margin
Supported by a gradual doubling of its downstream capacities (Finishing: +100%, Garment: +114%), we see improved margins in 2017. We believe management’s 2017 revenue growth target of 15% is achievable as SRIL has started to sell its new capacity production to its customers, particularly for export markets. In terms of geography, exports should dominate SRIL’s revenue reaching c.60% of sales.

Recommendation: Maintain BUY; TP unchanged at IDR340
Given continued margin improvement on better sales of higher-margin products and a cheap valuation of 5x 2017F PE, we maintain our BUY call on SRIL with an unchanged 12M TP of IDR340, based on a 2017F PE of 6.4x, 74% discount to the region. Risks include a further decline in polyester prices affecting ASPs of its ready-to-stock products and a strengthening IDR.

Jun 08,2016 09:18:20
Sri Rejeki Isman (SRIL): Simply cheap

Retain BUY on low valuation, but cut TP on lower earnings
On the back of lower contribution from SRIL’s higher margin garment business, we lower our operating profit by 8-12% in 2016-17F. On the bottom line, SRIL’s recent USD350mn bond issuance (8.25% senior notes due 2021 by Golden Legacy, SRIL’s wholly-owned subsidiary), has us cutting earnings by 1-8% in 2016-17F.  Given lower growth prospects this year, we have cut our target price from IDR400 to IDR340, reflecting a still cheap 2016F PE of 8.2x, 53% discount to the sector (exhibit 5). We still retain our BUY rating on SRIL and expect its recent market underperformance (exhibit 4) to reverse. Risks to our call would be expansion delays and a stronger IDR (10% appreciation in IDR = 100bps drop in gross margin).   

- Focusing on finishing to help minimize margin decline: For 2016, given the volume growth constraints due to full capacity utilisation, SRIL is expecting higher contribution from its made-to-order divisions, in particular the higher-margin finishing division (exhibit 6) to support earnings. Note that the garment division, with the highest margin, has reached 100% production capacity, contributing just 10.6% to 1Q16 revenue, down 170bps compared to the same period last year. As a result, SRIL’s gross margin decreased by 20bps y-y and 270bps q-q. To offset the drop in garment sales, SRIL has improved its fabric (finishing) sales by 15% y-y leading to a higher contribution of 27% to the 1Q16 top line from 25% in 1Q15 (exhibit 7).

- Rising exports, 49% of 1Q16 top line, to provide growth support: Exports are becoming an important earnings source for SRIL. In 2014, 42% of SRIL’s sales consisted of exports, before rising to 48% in 2015 and 49% in 1Q16, implying nearly half of the company’s sales are generated from overseas markets (exhibit 12). SRIL started exporting its products in 1993, by supplying military uniforms to Germany. Since then, SRIL has gained recognition for its good-quality products, and exported to around 50 countries (13 of them military products) as of 1Q16. Export growth is expected to be sustainable with overseas sales of cotton and yarn to China (Marubeni, TEXHONG), weaving products to Turkey and finishing/garment (e.g. military uniforms) to Europe. Compared to China, SRIL’s products have a pricing advantage on cheaper raw materials like cotton (exhibit 14).

Product diversification to allow acceleration in 2017F top line growth
In 2016F, we expect revenue to reach USD672mn, up 8% y-y, on 3% volume growth and 5% ASP hike. Given SRIL’s business divisions are currently running at almost 100% production capacity: Spinning (90%), weaving (92%), Finishing (94%) and Garment (100%), we expect price toWbe the main supporter for top line growth instead of volumes this year. However, for 2017F, with additional production capacity, we expect sales growth to accelerate to 15% y-y, mainly supported by 10% volume expansion. In addition, we also expect contribution from its military uniform segment to increase to 60% of 2016F garment sales (2015: 55%), compensating for losses in the fashion business and at the same time, providing higher margins.

May 02,2016 15:03:12

SRIL akan akuisisi perusahaan seragam asal Jerman

Sri Rejeki Isman Tbk (SRIL) berencana mengakuisisi perusahaan seragam asal Jerman. Perseroan memperkirakan dapat menyelesaikan akuisisi tersebut tahun depan. Perseroan masih belum menyebutkan nilai akuisisi Perusahaan asal jerman tersebut.

Perusahaan produsen seragam Jerman itu akan menjadi salah satu perpanjangan tangan bisnis SRIL di Eropa.

Perusahaan yang akan diakuisisi merupakan perusahaan seragam militer. Saat ini, nilai ekspor perseroan di Eropa mencapai 15% dari total pendapatan ekspor. Pada akhir tahun 2015 kemarin, Perseroan membukukan pendapatan dari Ekspor senilai USD301,38 juta.

Sebagai Informasi tambahan Aset hingga akhir tahun 2015 sebesar USD783,35 juta (Aset lancar mencapai USD323,14 juta, dengan Kas senilai USD77,14 juta), meningkat 12,09% dari USD698,87 juta di tahun 2014, dan total utang mengalami peningkatan dari USD467,43 juta tahun 2014 menjadi USD506,61 juta (Utang Jangka Pendek senilai USD67,16 juta) pada tahun 2015.