Kalbe Farma

Stock Quote Kalbe Farma - KBLF:

Business Summary

Kalbe Farma has four main business segments:

• Prescription Pharmaceuticals Division

Kalbe Farma’s Prescription Pharmaceuticals Division features a complete product range for all segments, from unbranded generic drugs, branded generics up to licensed drugs. These products are distributed to hospitals, pharmacies as well as drug stores across the archipelago through an integrated distribution network. Some of Kalbe’s top products include Brainact, Cefspan, Mycoral, Cernevit, Cravit, Neuralgin, Broadced, Neurotam, Hemapo, and CPG.

• Consumer Health Division

Kalbe’s Consumer Health Division offers over-the-counter drugs with therapeutic benefits, consumer products with health benefits, including supplements as well as other preventive products, along with energy drinks and healthy ready-to-drink products. Kalbe’s over-the-counter portfolio category covers more than six therapeutical classes with strong brands, commanding a dominant market share, over recent decades. Some of Kalbe’s top products such as Promag, Komix, Mixagrip and Entrostop have been awarded by various institutions. Some other Kalbe’s top products are Woods, Fatigon, Procold, Mextril, Extra Joss, Hydro Coco and Original Love Juice.

• Nutritionals Division

Kalbe’s Nutritionals Division showcases a complete product range for all important stages in consumer’s lives, from infants, toddlers, children, tweens, adults, expectant and lactating mothers, up to the elderly, as well as nutritional products for consumers that have special medical needs. Some of Kalbe’s top products include Morinaga Chil Kid, Morinaga Chil School, Morinaga Chil Mil, Morinaga BMT, Prenagen, Milna and Diabetasol, which command dominant market shares in Indonesia.

• Distribution & Logistics Division

To ensure product availability across the entire nation, Kalbe has built a Distribution and Logistics Division, run by its subsidiary PT Enseval Putera Megatrading Tbk, which is responsible for delivering Kalbe’s and third party principal’s products to over one million outlets in Indonesia. In addition, Kalbe has also expanded its business portfolio to include raw material trading, medical devices as well as retail health services. Kalbe’s distribution and logistics network for pharmaceuticals products is the most extensive in Indonesia. Supported by two Regional Distribution Centers (RDCs) in Jakarta and Surabaya, and 65 branches in 47 cities, Kalbe reaches more than one million outlets all over Indonesia, both directly and indirectly, in cooperation with local sub-distributors. Some of the major third party principals include PT Abbott Indonesia, PT Mead Johnson Indonesia, PT L’Oreal Indonesia, PT Kara Santan Pertama and PT Beiersdorf Indonesia.

Business Segment	Contribution to Total Revenue 2012	Contribution to Total Revenue 2013
Prescription Pharmaceuticals	24%	24%
Consumer Health	16%	16%
Nutritionals	22%	24%
Distribution & Logistics	38%	36%

^{Source: Kalbe Farma, Annual Report 2013}

In Indonesia, Kalbe Farma has coverage to more than 70 percent of general practitioners, 90 percent of specialists, 100 percent of hospitals, and 100 percent of pharmacies in the prescription pharmaceuticals market, as well as 80 percent in the consumer health and nutritional markets. Internationally, the company has export markets in Southeast Asia and Africa (it has built a plant in Nigeria, which focuses on medicine and food production).

In 2012, the company sealed a deal to take 100 percent shares in PT Hale International, a producer of health beverages, to further strengthen its position in the burgeoning Indonesian market.

Kalbe Farma's Financial Highlights:

	2010	2011	2012	2013	2014	2015	2016
Net Sales	10,226.8	10,911.9	13,636.4	16,002.1	17,368.5	17,887.5	19,374.2
Gross Profit	5,166.4	5,551.2	6,533.4	7,679.1	8,475.8	8,591.6	9,488.0
Net Income	1,286.3	1,482.2	1,733.9	1,919.5	2,066.0	2,004.2	2,299.8
Income before Tax	1,770.4	1,987.3	2,308.0	2,572.5	2,765.6	2,720.9	3,091.2
Total Assets	7,032.5	8,274.6	9,418.0	11,315.1	12,439.3	13,696.4	15,226.0
Total Liabilities	1,260.4	1,758.6	2,046.3	2,815.1	2,675.2	2,758.1	2,762.2
Earnings per Share¹²	137	158	37	41	44	43	49
Cash Dividend per Share¹²	70	95	19	17	19	19

^{in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
² note 1:5 stock split in October 2012
Source: Kalbe Farma, Annual Report 2016}

Future Prospects of Indonesia's Pharmaceutical Industry

Compared to its neighboring countries, Indonesia’s healthcare market is still relatively small. Among ASEAN countries, Indonesia has one of the lowest total expenditures on health, averaged at only 2.6-2.7 percent of its GDP. This is partially due to the relatively low health insurance penetration within the population. As such health related expenditures are largely financed by households' out-of-pocket payments. However, due to the country’s vast population and growing middle class base, Indonesia has the potential to become a lucrative healthcare and pharmaceuticals market, projected to reach IDR 312 trillion (USD $31.2 billion) by 2015.

Furthermore, the Indonesian government’s decision to implement its universal health insurance by 2014 will increase public access to healthcare services, creating a positive outlook for the industry going forward.

Pharmaceutical companies are still heavily dependent on imports for raw material supply. Raw material imports reached 95 percent of the industry’s total raw material requirements. Given its heavy dependence on imports, recent volatility in the rupiah exchange rates has sparked some concerns within the pharmaceuticals industry.

The healthcare and pharmaceuticals industries will continue to benefit from Indonesia’s positive economic outlook. Consumer’s rising purchasing power not just presents larger market opportunities, but also product expansion possibilities. Going forward, the healthcare industry also needs to face a number of challenges. Ongoing global uncertainty that triggers fluctuation in rupiah exchange rates may have an impact given the industry’s high dependence on imports of raw material. Furthermore, due to the lack of quality and quantity of infrastructure the distribution process of products face difficulties. Still, rising purchasing power and the relatively low healthcare penetration will remain the major drivers behind the industry growth.

As part of the healthcare industry, the Indonesian pharmaceuticals market has enjoyed strong growth in the past decade, with approximately 13.6 percent average growth per year. In 2012, the pharmaceuticals industry registered a 15.9 percent growth, reaching over IDR 50 trillion (USD $5 billion) by the end of the year. The ethical drug segment contributed IDR 30.1 trillion of total sales, while the remaining IDR 19.9 trillion came from over-the-counter (OTC) drugs.

Projection Kalbe Farma's Future Corporate Earnings:

	2018	2019	2020F	2021F	2022F
Net Revenue	21,074.0	22,633.0	23,220.0	24,758.0	25,996.0
Net Profit	2,457.0	2,685.0	2,721.0	2,885.0	3,062.0
P/E Ratio (x)	29.8	29.2	27.2	25.4	23.8

^{in billion IDR, unless otherwise stated
Source: Trimegah Sekuritas (08.10.2020)}