Danareksa Sekuritas estimates that revenue of Kimia Farma is to rise 12.3 percent (y/y) to IDR 5.5 trillion (approx. USD $417 million) in 2016. In the following years, revenue and profit are expected to maintain momentum supported by the company's expanding network of branches and health clinics across the archipelago, as well as growing production capacity, and the company's expansion toward the upstream sector (it is constructing facilities to produce raw materials for medicines and other pharmaceutical products).

Up to March 2016, Kimia Farma owned 736 pharmacies, 332 health clinics, and 43 laboratories. However, the company has high ambitions. It wants to add 100 pharmacies and 50 health clinics in the years ahead in order to cater to rising demand across Indonesia supported by the government's universal healthcare scheme (JKN).

In 2015 Kimia Farma announced it decided to invest up to USD $70.9 million in a new pharmaceutical manufacturing facility in Banjaran Industrial Estate, Bandung (West Java). The new plant, expected to become operational in 2018, will produce herbal medicines for both the domestic market and export markets. It is partly funded through the issuance of medium term notes worth IDR 200 billion.

Kimia Farma also set up a joint venture with the local unit of South Korea- based Sungwun Pharmacopia Co Ltd (this local unit is Sungwun Pharmacopia Indonesia) to build a medical salt factory in Lippo Cikarang Industrial Estate in Bekasi (West Java). This plant is designed to produce active pharmaceutical ingredients (part of which is to be exported to the USA and Japan).

Future Projection Kimia Farma's Financial Highlights:

     2014    2015   2016F   2017F   2018F
Net Sales 4,521.0 4,860.4 5,460.0 6,229.0 7,134.0
Net Income   255.9   248.8   276.0   305.0   361.0
EBITDA   353.0   358.0   433.0   530.0   621.0
P/E Ratio (x)    25.6    26.3    23.7    21.5    18.1
PBV (x)     3.9     3.6     3.2     2.8     2.5

in billion IDR rupiah except stated otherwise
Source: Danareksa Sekuritas (13/07/2016)

By building upstream facilities, Kimia Farma reduces its need for imports of raw materials (reducing risks of foreign exchange losses), while it can also become a supplier of raw materials to other pharmaceutical companies in Indonesia.

Danareksa Sekuritas advises investors to purchase shares of Kimia Farma. It set its target price for Kimia Farma's shares at IDR 1,370 a piece. On Wednesday's trading day (13/07) shares of Kimia Farma did not move. However, so far this year the company's shares have surged a whopping 33.91 percent.

Kimia Farma - KEAF: