A Fundamental Analysis of PT Kedaung Indah Can Tbk (KICI)
PT Kedaung Indah Can Tbk (KICI) is an Indonesian-based company specializing in the manufacturing of metal containers and packaging. As a publicly listed entity on the Indonesia Stock Exchange (IDX), KICI provides essential products to various industries, primarily in the fast-moving consumer goods (FMCG) sector. For investors considering this stock, a fundamental analysis is crucial to understand its financial health, market position, and future prospects. This article provides a comprehensive overview of KICI's business model, financial performance, and key valuation metrics.
 |
| A Fundamental Analysis of PT Kedaung Indah Can Tbk (KICI) |
Company Overview and Business Segments
Established in 1974, Kedaung Indah Can has built a strong reputation as a reliable supplier of high-quality metal packaging. The company's core business is business-to-business (B2B), serving large clients in industries where packaging is a critical component of the final product. KICI's main products and segments include:
General Cans: Manufacturing a variety of metal cans and containers for food products such as biscuits, candies, and edible oils. The demand for these products is stable and non-cyclical, tied to everyday consumer consumption.
Specialty Packaging: Producing custom-designed metal containers for a range of products, including paints, chemicals, and industrial lubricants. This segment caters to specific client needs and often involves long-term contracts.
Caps and Closures: Manufacturing metal caps and closures for bottles and jars, which are essential components for the food and beverage industry.
KICI's business model benefits from its position as an integral part of its clients' supply chains. Its long-standing relationships with major food and beverage companies provide a consistent and reliable revenue stream.
Financial Performance Analysis
An examination of KICI's financial statements reveals a company with a stable, albeit challenged, financial performance.
Revenue and Profitability: KICI has shown consistent revenue generation over the past few years. In the trailing twelve months (TTM) as of late 2024, the company reported a revenue of approximately Rp 200 billion. However, its profitability has been under pressure due to rising raw material costs, particularly for tinplate, which is the primary material used in its products. In 2024, the company reported a net profit of around Rp 1.5 billion, a significant decrease from the previous year. This indicates that the company is struggling to pass on its increased costs to customers, resulting in squeezed margins.
Financial Ratios: The company's profitability is highly sensitive to external factors.
Gross Margin: KICI's gross margin has been around 15%, which is relatively healthy for a manufacturing company. However, the operating margin is much lower, reflecting the high cost of sales, administration, and overhead.
Net Profit Margin: The net profit margin for 2024 was a very thin 0.75%. This is a major concern for investors, as such a low margin makes the company vulnerable to any negative external shocks.
Return on Equity (ROE) & Return on Assets (ROA): The ROE, a measure of how efficiently the company uses shareholders' equity to generate profit, stood at a low 0.8% in 2024. This suggests the company is not generating strong returns for its shareholders.
Valuation Metrics
Valuation metrics can help determine whether KICI's stock is currently a good value.
Price-to-Earnings (P/E) Ratio: Based on its trailing twelve months (TTM) earnings, KICI's P/E ratio is around 120x. This is an extremely high P/E ratio, far above the market average. It suggests that the stock is highly overvalued based on its current earnings, indicating that the market may be speculating on a massive future turnaround or that the price is being driven by factors other than fundamentals.
Price-to-Book (P/B) Ratio: KICI's P/B ratio is approximately 0.3x. This is a strong indicator that the stock is trading at a significant discount to its book value, or the value of its net assets. This suggests a potential margin of safety, where the company's assets are valued by the market at a fraction of their recorded value. This dichotomy—a very high P/E and a very low P/B—presents a complex puzzle for investors.
Dividend Yield and Policy: The company has a history of paying small dividends, which can be an attractive feature for income-oriented investors. However, given its recent thin profitability, the sustainability of consistent dividend payouts is a significant concern.
Key Strengths and Investment Considerations
Strengths:
Stable Demand: KICI's products are essential components for the food and beverage industry, ensuring a consistent and non-cyclical demand for its products.
Established Market Position: The company has a long history and established relationships with its clients, which provides it with a stable revenue base.
Low P/B Ratio: The low P/B ratio suggests that the company's assets may be undervalued, which could offer a margin of safety for investors.
Weaknesses:
Squeezed Profit Margins: The company's profitability is highly sensitive to the price of raw materials and intense competition, leading to very thin margins.
High Valuation (P/E): Despite its poor recent financial performance, the stock's astronomical P/E ratio suggests it may be significantly overvalued, leaving little room for error and exposing investors to high risk.
Lack of Diversification: The company's narrow product focus makes it highly dependent on a few key industries.
Conclusion
A fundamental analysis of PT Kedaung Indah Can Tbk (KICI) reveals a company with a strong legacy and a stable business model but with very weak recent financial performance. Its extremely thin net profit margins and low return on equity are significant red flags for investors. The perplexing valuation, with a very high P/E but a very low P/B, highlights a major discrepancy between the market's view of its earnings potential and its asset value.
For conservative, value-oriented investors, the company's weak fundamentals and high P/E ratio make it a very high-risk proposition. The low P/B may suggest a margin of safety, but it does not guarantee a positive investment outcome. A prudent investor would wait for clear and consistent evidence of improved profitability and a successful strategy for managing raw material costs before considering an investment in KICI.