Indonesia Daily Focus November 27, 2020
Integra Indocabinet Tbk (WOOD IJ) - Climbing up the money tree
WOOD
booked solid results in 9M20 with a net profit of IDR189.3bn, inching
up by 3.9% from last year’s figure of IDR182.2bn. Revenue jumped 34% YoY
on the back of stronger sales to the US.
The
US has implemented trade war tariffs on imported Chinese products since
July 2018, which has affected China's export to the US. That resulted
in a significant decrease of 35.9% in China's furniture export to the US
market in 2019.
Even
during the pandemic, WOOD expanded its capacity/production for several
product lines: 1) Millwork (double capacity in 2019, triple capacity in
2020); 2) wooden blind (25 containers/month in 2019, 50 containers/month
in 2020); and, 3) plywood (double capacity in 2020).
Unlike
Vietnamese furniture producers which have to import raw materials,
which are subject to log price fluctuations, WOOD is able to enjoy
stable supply from its own forest and Indonesia's vast tropical forest
area. Logs export ban also ensures stable domestic wood supply. As a
note, 80% of COGS are raw materials, i.e. wood. Thus, securing wood
supply is the key to maintaining stable production.
Currently, WOOD is trading at IDR590/share, implying trailing FY20 P/E of 14,7x . Risks include:
1) Lower-than-expected earnings; 2) forex volatility; and, 3) trade war.
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