Kalbe Farma - research-doc.credit-suisse.com

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

22 February 2012Asia Pacific/Indonesia

Equity ResearchMajor Pharmaceuticals (Healthcare)

Kalbe Farma (KLBF.JK / KLBF IJ)

DECREASE TARGET PRICE

Downward revision with higher contribution from lower-margin business ■ Earnings revised downward on margin squeeze. We revise our estimates

for Kalbe Farma to be in line with 2011 indicative financial results and management guidance for 2012. Management has guided for a much lower net profit in 2012 compared with our previous estimate and consensus�, on the back of a higher contribution from the distribution business (36% of total revenue in 2012E, up from 30% in 2011E). Distribution margins are much lower than those of manufacturing; we thus downgrade our margin estimates, with our net profit down by 14% for 2012E and 15% for 2013E.

■ Cash will be utilised for capex and dividend. Kalbe continues to be in a net cash position, wherein we estimate cash to be at Rp1.9 tn (US$208 mn) by the end of this year. This will be used to fund capex (estimated to be at around Rp800 bn this year) and for cash dividend (at a 50% payout ratio, it has around 2% yield).

■ Treasury stock worth US$302 mn. Kalbe also has 781 mn shares in treasury stock (a 7.7% stake). At Rp3,500/share, it is valued at Rp2.7 tn (US$302 mn). It has until Aug-13, according to the Bapepam regulations, to decide whether to retire the shares (thus enhancing the shareholders� value) or to sell them back to the market. The shares were purchased between Feb-07 and Mar-10, at an average selling price of Rp880/share.

■ Maintain NEUTRAL, target price revised down to Rp3,100 (from Rp3,250). We revise our target price downward as we revise our earnings down. We also revise our WACC from 11.9% to 11.3% as we revise our risk-free rate to 7% (from 8%). Our new target price equates to 19.9x P/E 2012E with a 27% estimated earnings growth CAGR for FY12-14E. We view that valuation is quite demanding, thus maintain our NEUTRAL rating.

Share price performance

01000200030004000

Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11100120140160180

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the JSX COMPOSITE INDEX which closed at 3947.17 on 16/02/12 On 16/02/12 the spot exchange rate was Rp9000./US$1

Performance over 1M 3M 12M Absolute (%) -2.1 3.7 22.8 Relative (%) -2.5 -4.6 6.8

Financial and valuation metrics

Year 12/10A 12/11E 12/12E 12/13ERevenue (Rp bn) 10,226.8 10,909.0 13,008.3 14,758.8EBITDA (Rp bn) 1,798.9 2,005.8 2,188.3 2,561.2EBIT (Rp bn) 1,790.9 1,953.9 2,112.2 2,461.9Net profit (Rp bn) 1,302.8 1,463.7 1,580.7 1,841.3EPS (CS adj.) (Rp) 128.28 144.12 155.65 181.30Change from previous EPS (%) n.a. -5.0 -13.6 -14.6Consensus EPS (Rp) n.a. 158 177 207EPS growth (%) 40.2 12.3 8.0 16.5P/E (x) 27.3 24.3 22.5 19.3Dividend yield (%) 0.7 2.0 2.3 2.4EV/EBITDA (x) 18.7 16.8 15.4 13.0P/B (x) 6.6 5.8 5.1 4.4ROE (%) 26.9 25.3 24.0 24.4Net debt/equity (%) Net cash Net cash Net cash Net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating NEUTRAL* Price (21 Feb 12, Rp) 3,500.00 Target price (Rp) (from 3,250.00) 3,100.00¹ Chg to TP (%) -11.4 Market cap. (Rp bn) 35,546 Enterprise value (Rp bn) 33,760 Number of shares (mn) 10,156.01 Free float (%) 47.7 52-week price range 3,725.0 - 2,825.0 *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months.

Research Analysts Ella Nusantoro

62 21 2553 7917 [email protected]

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 2

Focus charts and table Figure 1: Kalbe Farma�sales breakdown, 2011E Figure 2: Kalbe Farma�sales breakdown, 2012E

Nutritionals24%

Consumer health19%Prescription

pharma27%

Distribution30%

Nutritionals22%

Consum er health

18%Prescription

pharm a24%

Distribution36%

Source: Credit Suisse estimates Source: Credit Suisse estimates

Figure 3: Kalbe Farma�quarterly performance Figure 4: Kalbe Farma�revenue YoY vs. margins

795

903936 917

823

9671013 1001

957

1113 1122

1320

1098

12861343

1439

1220

13611406

1554

332 303 297

198267 286 265

325 308390

355

513

387452 450

503

417462

526 544

1555

1758

1840 1852

1743

2003 1971

2160

1989

22282277

2593

2188

25182566

2954

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2596

2743

3217

0

250

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1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q111500

1750

2000

2250

2500

2750

3000

3250

Gross profit (Rpbn) Operating profit (Rpbn) Revenue (RHS)

9%

12%

15%

15%

12%

13%

11%

12%

14%

13%

14%

15%

10%

12%12%

13%

8%

5%

6%

7%21%

19%18%

16% 15% 15% 14% 15%15%

17% 16%17% 18% 18% 18% 18% 18% 18% 18% 18%

51% 51% 51% 51%

47% 48%49% 48% 48%

49% 49% 50% 50% 51% 51% 51%52% 52% 52%

51%

4%

6%

8%

10%

12%

14%

16%

3M07 9M07 3M08 9M08 3M09 9M09 3M10 9M10 3M11 9M1110%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Revenue YoY (LHS) Operating margin Gross margin

Source: Company data Source: Company data

Figure 5: Kalbe Farma trades at a 59% premium, based on P/B relative less ROE relative Indonesia

Figure 6: Kalbe Farma�s forward P/E band�2011 to date, trades at an average 22.2x

59%

Av erage 16%(Jan 07 to date)

-40%-20%

0%20%40%60%80%

100%

Feb-04

Feb-05

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

PB Rel Less ROE Rel to Indonesia Av erage

0

1,000

2,000

3,000

4,000

02/06 02/07 02/08 02/09 02/10 02/11 02/12

Rp/share 25x

20x

15x

10x

Source: Bloomberg, MSCI, Credit Suisse estimates Source: Bloomberg, Credit Suisse estimates

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 3

Revision with higher contribution from lower-margin business We revise our estimates on Kalbe Farma to be in line with 2011 indicative financial results and management guidance for 2012. Management has guided for a much lower net profit in 2012 (5-10% growth YoY) compared with our previous estimates as well as consensus�. This is on the back of a higher revenue contribution from the distribution business, wherein the company has started distributing (powder milk such as Gain Plus, Gain School, PediaSure, Isomil and Ensure) to new third-party principal, PT Abbott Indonesia. This will likely add Rp800 bn to Rp1 tn in revenue to the distribution division, albeit with lower margins. As a result, the distribution division should account for 36% of total revenue in 2012E, up from 30% in 2011E. Revenue has been adjusted slightly, to grow at 19% this year and 14% next year to Rp13 tn and Rp14.8 tn, respectively.

Figure 7: Kalbe Farma�sales breakdown, 2011E Figure 8: Kalbe Farma�sales breakdown, 2012E

Nutritionals24%

Consumer health19%Prescription

pharma27%

Distribution30%

Nutritionals22%

Consum er health

18%Prescription

pharm a24%

Distribution36%

Source: Credit Suisse estimates Source: Credit Suisse estimates

We downgrade our margin estimates, as distribution margins are much lower compared with those of manufacturing. In 9M11, gross margins from the distribution division were at 30%, versus prescription pharma�s 66%, nutritionals� 61% and consumer health�s 56%. Our gross margins now stand at 49.7% in 2012E, from previous estimate of 52.4%, while our operating margins are now adjusted to 16.2% for 2012E, from 18.6% previously. We have also taken into account the increase in labour costs, by around 30% this year, in our estimates. Labour accounts for around 11% of total sales. In all, our net profit has been downgraded by 14% for 2012E and 15% for 2013E to stand at Rp1.58 tn (+8% YoY) and Rp1.84 tn (+17% YoY), respectively. Its net margin is at around 12%.

Assuming other things remain same, we also calculate that every 1% change in the IDR to the USD will have an impact on earnings by around 2%. This is on the back of around 90% of raw materials being USD-denominated.

Gross margin from distribution is at 30%, versus manufacturing�s 56-66%

Reducing our margin estimates

Sensitivity to exchange rate

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 4

Figure 9: Kalbe Farma�changes in estimates Old New Changes (%)

(Rp bn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013ENutritionals 2,548 2,907 3,318 2,618 2,855 3,389 2.8 -1.8 2.1Consumer health 2,079 2,531 3,080 2,073 2,327 2,754 -0.3 -8.0 -10.6Prescription pharma 2,857 3,248 3,695 2,945 3,178 3,646 3.1 -2.2 -1.3Distribution 3,699 4,277 4,951 3,273 4,647 4,971 -11.5 8.6 0.4Total revenue 11,183 12,964 15,044 10,909 13,008 14,759 -2.5 0.3 -1.9Gross profit 5,768 6,788 7,903 5,541 6,463 7,427 -3.9 -4.8 -6.0Operating profit 2,025 2,413 2,839 1,954 2,112 2,462 -3.5 -12.5 -13.3Pre-tax profit 2,117 2,514 2,965 2,044 2,202 2,565 -3.4 -12.4 -13.5Net profit 1,540 1,829 2,157 1,464 1,581 1,841 -5.0 -13.6 -14.6Margin analysis: (%) Gross 51.6 52.4 52.5 50.8 49.7 50.3Operating 18.1 18.6 18.9 17.9 16.2 16.7Pre-tax 18.9 19.4 19.7 18.7 16.9 17.4Net 13.8 14.1 14.3 13.4 12.2 12.5Assumptions: (%) Average inflation 5.8 6.5 6.5 5.4 5.5 6.5GDP growth 6.0 5.5 5.5 6.4 5.9 6.5Exchange rate (Rp/US$) Average 8,539 8,225 8,307 8,769 8,884 8,575 -0.8 -3.8 0.7End 8,350 8,100 8,181 9,075 8,700 8,500 -5.8 -1.7 1.6

Source: Credit Suisse estimates

Target price revised down to Rp3,100, equates to 19.9x P/E 2012E We revise our target price down to Rp3,100, from Rp3,250 previously, as we revise down our earnings estimates. We have also revised our WACC from 11.9% to 11.3% as we revise our risk-free rate to 7% (8% previously). Our new target price equates to 19.9x P/E 2012E with a 27% estimated earnings growth CAGR for FY12-14E. We view that the current valuation is quite demanding; we thus maintain our NEUTRAL rating on the stock.

Figure 10: Kalbe Farma�DCF calculation Assumptions Risk-free rate 7.0%Beta 0.9 Risk premium 5%Ke 11.3%Kd 11.0%Tax 25%Debt/capital 0.00 Equity/capital 1.00 WACC 11.3%Terminal growth 5.9%NPV (Rp bn) 27,142 Add: Cash 1,881 Minus: Debt (24)Value (Rp/share) 3,093 Target price (Rp) 3,100

Source: Credit Suisse estimates

In 2011, the stock slightly outperformed the JCI by gaining 5% versus 3% for JCI, while YTD the stock has gained only 3% while JCI gained 5%. This is after the stock�s massive outperformance in 2009 (+225%) and 2010 (+150%). We attribute this to the

The stock has slightly underperformed JCI YTD

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 5

undemanding valuation. Based on the P/B relative less ROE relative to Indonesia, Kalbe trades at a 59% premium, much higher than its average of 16% during January 2007 to date.

Figure 11: KalbeFarma trades at a 59% premium, based on P/B relative less ROE relative Indonesia

Figure 12: Kalbe Farma�s forward P/E band�2011 to date, trades at an average 22.2x

59%

Av erage 16%(Jan 07 to date)

-40%-20%

0%20%40%60%80%

100%

Feb-04

Feb-05

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

PB Rel Less ROE Rel to Indonesia Av erage

0

1,000

2,000

3,000

4,000

02/06 02/07 02/08 02/09 02/10 02/11 02/12

Rp/share 25x

20x

15x

10x

Source: Bloomberg, MSCI, Credit Suisse estimates Source: Bloomberg, Credit Suisse estimates

Figure 13: Indonesia consumer valuation snapshot Curr Target Market P/E EPS growth P/B (x) EV/EBITDA ROE price price Upside Rat cap (x) (x) (x) (x) (%)

Company (Rp) (Rp) (%) US$ mn 12E 13E 12E 13E 12E 13E 12E 13E 12E 13EUnilever Indonesia 19,400 13,600 -30% U 16,356 31.4 26.8 15 17 27.6 23.9 22.8 19.4 88 89Gudang Garam 54,000 60,600 12% N 11,481 17.7 15.6 14 14 3.7 3.2 11.9 10.4 21 20Indofood Sukses 4,900 6,850 40% N 4,754 12.1 10.6 7 14 2.0 1.8 4.6 3.9 17 17Kalbe Farma 3,500 3,250 -7% N 3,928 19.4 16.5 19 18 4.9 4.2 13.4 11.1 25 25Indofood CBP 5,600 7,300 30% O 3,608 14.8 13.0 15 14 2.8 2.5 7.5 6.4 19 19Average 17.2 14.8 17 16 3.9 3.4 10.5 8.9 22 22

*share price as of 21 February 2012

Source: Company data, Credit Suisse estimates

Where will the cash go? The company continues to be in a net cash position, wherein we estimate that cash would be Rp1.9 tn (US$208 mn) by the end of this year. Capex is estimated to be around Rp800 bn this year, whereas it will be used to fund expansions of capacity as well as distribution coverage (by building three new regional distribution centres in Medan, Palembang and Makassar). Capex should be funded using internal cash flows.

The company always looks out for potential acquisitions. It seeks the products that complement its pipeline, especially in the consumer health division, and that have strong brand value, in both the domestic and Asean markets. To date, there has been no definite move on the acquisition front.

Dividend is expected to continue to be paid out at 50%, which will provide a dividend yield of around 2%.

In addition to the cash in hand, the company holds the treasury stock amounting to 781 mn shares, or equivalent to a 7.7% stake. At Rp3,500/share, the treasury stock is valued at Rp2.7 tn (US$302 mn). The company has not decided on whether to retire the shares (thus enhancing the shareholders� value) or to sell them back to the market. It has until August 2013, according to the Bapepam regulations, to decide. The shares were purchased between February 2007 and March 2010, at an average selling price of Rp880/share, or at a total cost of Rp688 bn (US$80 mn).

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 6

Good 2011 performance, but market expects more Management has provided 2011 indicative financial performance with net profit surging 14% YoY to Rp1.46 tn, on the back of higher interest income and lesser forex loss (as the IDR strengthened against the USD). However, this was below our initial estimate (95%) as well as consensus�. The audited results will be published by the end of March.

The company�s revenue grew only 7% YoY to Rp10.9 tn in FY11, accounting for 98% of our initial estimate. The highest revenue growth was recorded at the consumer health division, which rose 22% YoY to Rp2 tn, accounting for 19% of total, while the prescription pharma and nutritionals divisions each reported 14% higher revenue YoY, accounting for 27% and 24% of total, respectively. The distribution business reported 10% lower revenue YoY, underpinned from the higher comparison base, as up to August 2010, it included the contribution from the packaging business that the company sold off.

Gross profit rose 7% YoY to Rp5.5 tn, accounting for 96% of our estimate. Gross margin improved marginally to 50.8%, from 50.5% in 2010, on the back of a stronger IDR, as the majority of the company�s costs are USD-denominated.

Operating profit was reported to grow 9% YoY to Rp1.95 tn, accounting for 96% of our estimate, with margin at 17.9%, from 17.5% in the previous year.

4Q11 had the weakest margins In 4Q11, Kalbe reported only 2% higher net profit QoQ (+4% YoY) to Rp399 bn, despite its revenue surging 17% QoQ (+9% YoY) to Rp3.2 tn. This was a result of a weakening IDR as well as higher expenses during the period. Its gross margin declined to 48.3%, from 51.3% in 3Q11, despite gross profit rising 11% QoQ (+8% YoY). Operating profit increased 3% YoY to Rp544 bn (+8% YoY) and operating margin declined to 48.3% in 4Q11, versus 51.3% in 4Q11.

Figure 14: Kalbe Farma�quarterly and full-year financial performance (Rp bn) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 QoQ Chg YoY Chg FY10 FY11 YoY ChgRevenue 2,566 2,954 2,353 2,596 2,743 3,217 17.3% 8.9% 10,227 10,909 6.7%Gross profit 1,343 1,439 1,220 1,361 1,406 1,554 10.6% 8.0% 5,166 5,541 7.3%Operating profit 450 503 417 462 526 544 3.4% 8.1% 1,791 1,948 8.8%Net profit 330 384 316 359 390 399 2.4% 3.8% 1,286 1,464 13.8%Margins Gross 52.3% 48.7% 51.8% 52.4% 51.3% 48.3% 50.5% 50.8%Operating 17.5% 17.0% 17.7% 17.8% 19.2% 16.9% 17.5% 17.9%Net 12.8% 13.0% 13.4% 13.8% 14.2% 12.4% 12.6% 13.4%

Source: Company data

Figure 15: Kalbe Farma�quarterly performance Figure 16: Kalbe Farma�revenue YoY vs. margins

795

903936 917

823

9671013 1001

957

1113 1122

1320

1098

12861343

1439

1220

13611406

1554

332 303 297

198267 286 265

325 308390

355

513

387452 450

503

417462

526 544

1555

17581840 1852

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2003 1971

2160

1989

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2954

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3217

0

250

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1750

2000

2250

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2750

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Gross profit (Rpbn) Operating profit (Rpbn) Revenue (RHS)

9%

12%

15%

15%

12%

13%

11%

12%

14%

13%

14%

15%

10%

12%12%

13%

8%

5%

6%

7%21%

19%18%

16% 15% 15% 14% 15%15%

17% 16%17% 18% 18% 18% 18% 18% 18% 18% 18%

51% 51% 51% 51%

47% 48%49% 48% 48%

49% 49% 50% 50% 51% 51% 51%52% 52% 52%

51%

4%

6%

8%

10%

12%

14%

16%

3M07 9M07 3M08 9M08 3M09 9M09 3M10 9M10 3M11 9M1110%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Revenue YoY (LHS) Operating margin Gross margin

Source: Company data Source: Company data

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 7

Financial summary Figure 17: Kalbe Farma�key assumptions Year-end December 2008 2009 2010 2011E 2012E 2013E 2014EAverage inflation (%) 9.8% 4.8% 5.1% 5.4% 5.5% 6.5% 6.0%GDP growth (%) 6.1% 4.5% 6.1% 6.4% 5.9% 6.5% 6.5%Population 228.5 231.4 237.6 240.5 243.4 246.3 249.3Exchange rate (Rp/US$) Average 9,757 10,354 9,078 8,769 8,884 8,575 8,661End 10,950 9,400 8,991 9,075 8,700 8,500 8,585

Source: Company data, Credit Suisse estimates

Figure 18: Kalbe Farma�profit & loss statements (Rp bn) Year-end December 2008 2009 2010 2011E 2012E 2013E 2014ERevenue 7,877 9,087 10,227 10,909 13,008 14,759 17,065Cost of goods sold (4,074) (4,575) (5,060) (5,368) (6,545) (7,332) (8,383)Gross profit 3,804 4,512 5,166 5,541 6,463 7,427 8,682Operating expenses (2,661) (2,946) (3,375) (3,587) (4,351) (4,965) (5,669)Operating profit 1,143 1,566 1,791 1,954 2,112 2,462 3,013Interest income 54 65 55 93 92 106 131Interest expense (52) (53) (21) (3) (3) (3) (3)FX gain (loss) 43 (95) (23) - - - -Other income (exp.) (9) (12) (31) 0 0 0 (0)Pre-tax profit 1,178 1,471 1,770 2,044 2,202 2,565 3,141Income tax (353) (421) (427) (515) (550) (641) (785)Minority interests (119) (121) (57) (65) (71) (82) (101)Net profit 707 929 1,286 1,464 1,581 1,841 2,255yoy growth: Revenue 12.5% 15.4% 12.5% 6.7% 19.2% 13.5% 15.6%Gross profit 7.1% 18.6% 14.5% 7.2% 16.6% 14.9% 16.9%Operating profit 1.2% 37.0% 14.4% 9.1% 8.1% 16.6% 22.4%Pre-tax profit 1.7% 24.9% 20.3% 15.5% 7.7% 16.5% 22.5%Net profit 0.2% 31.4% 38.5% 13.8% 8.0% 16.5% 22.5%

Source: Company data, Credit Suisse estimates

Figure 19: Kalbe Farma�key ratios Year-end December 2008 2009 2010 2011E 2012E 2013E 2014E ROA 12.4% 14.3% 18.3% 18.6% 17.7% 18.1% 19.2% ROE 19.5% 21.6% 23.9% 23.7% 22.5% 22.9% 24.1% Gross margin 48.3% 49.7% 50.5% 50.8% 49.7% 50.3% 50.9% Operating margin 14.5% 17.2% 17.5% 17.9% 16.2% 16.7% 17.7% Pre-tax margin 15.0% 16.2% 17.3% 18.7% 16.9% 17.4% 18.4% Net margin 9.0% 10.2% 12.6% 13.4% 12.2% 12.5% 13.2%

Source: Company data, Credit Suisse estimates

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 8

Figure 20: Kalbe Farma�balance sheet (Rp bn) Year-end December 2008 2009 2010 2011E 2012E 2013E 2014ECash and equivalents 1,447 1,625 1,907 1,810 1,881 2,341 2,917Accounts receivable 935 1,204 1,263 1,283 1,543 1,755 2,020Inventories 1,606 1,561 1,551 1,857 2,256 2,528 2,958Other current assets 180 311 317 331 402 456 524Total current assets 4,168 4,702 5,037 5,281 6,082 7,080 8,419Fixed assets - net 1,327 1,398 1,605 2,212 2,498 2,748 2,960Other 208 382 390 355 354 355 363Total assets 5,704 6,482 7,032 7,848 8,933 10,182 11,742 S/T debts 146 339 24 24 24 24 24Accounts payable 306 482 488 474 581 666 758Current maturities 259 1 0 - - - -Other current liabilities 540 753 634 645 781 886 1,019Total current liabilities 1,250 1,574 1,146 1,143 1,386 1,576 1,801Bank loans 0 1 1 - - - -Notes payable & bonds - - - - - - -Other liabilities 831 597 511 524 536 550 567Total liabilities 2,081 2,172 1,659 1,667 1,922 2,126 2,367Shareholders' equity 3,622 4,310 5,374 6,181 7,012 8,056 9,374Total liabilities & equity 5,704 6,482 7,032 7,848 8,933 10,182 11,742

Source: Company data, Credit Suisse estimates

Figure 21: Kalbe Farma�cash flow statement (Rp bn) Year-end December 2008 2009 2010 2011E 2012E 2013E 2014EEBIT 1,143 1,566 1,791 1,954 2,112 2,462 3,013Depreciation & amortization 156 159 8 52 76 99 122Net interest 2 12 34 90 90 103 129Tax paid (353) (421) (427) (515) (550) (641) (785)Net working capital (117) 34 (166) (343) (488) (349) (537)Others (120) (401) (103) (31) (69) (83) (109)Cash from operations 711 948 1,137 1,207 1,170 1,591 1,832Capex (279) (230) (215) (659) (362) (349) (334)FCF 432 718 922 548 808 1,242 1,498Borrowings 91 (65) (315) (1) - - -Dividends paid (91) (117) (234) (656) (750) (797) (938)Others (278) (357) (74) 12 12 14 17Cash from financing activities (278) (540) (624) (645) (738) (783) (921)Change in cash 154 179 298 (97) 70 460 577 Cash at the beginning 1,292 1,447 1,625 1,907 1,810 1,881 2,341Cash at the end 1,447 1,625 1,907 1,810 1,881 2,341 2,917

Source: Company data, Credit Suisse estimates

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 9

Companies Mentioned (Price as of 21 Feb 12) Gudang Garam (GGRM.JK, Rp54,000.00, NEUTRAL, TP Rp60,600.00) Indofood CBP (ICBP.JK, Rp5,600.00, OUTPERFORM, TP Rp7,300.00) Indofood Sukses Makmur (INDF.JK, Rp4,900.00, NEUTRAL, TP Rp6,850.00) Kalbe Farma (KLBF.JK, Rp3,500.00, NEUTRAL, TP Rp3,100.00) Unilever Indonesia (UNVR.JK, Rp19,400.00, UNDERPERFORM, TP Rp13,600.00)

Disclosure Appendix

Important Global Disclosures I, Ella Nusantoro, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for KLBF.JK KLBF.JK Closing

Price Target

Price

Initiation/ Date (Rp) (Rp) Rating Assumption 4-May-09 890 765 U 31-Jul-09 1310 933 3-Nov-09 1230 1300 N 31-Mar-10 1870 1870 27-Jul-10 X 18-Aug-10 2250 2600 1-Nov-10 2775 2800 15-Nov-10 3075 3200 3-May-11 3600 3400 27-Oct-11 3475 3250

765933

1300

1870

26002800

32003400

3250

27-Jul-10

N

U590

1090

1590

2090

2590

3090

3590

22-Feb-

09

22-Apr-0

9

22-Jun

-09

22-Aug-

09

22-Oct-0

9

22-Dec-0

9

22-Feb-

10

22-Apr-10

22-Jun-1

0

22-Aug-

10

22-Oct-1

0

22-Dec-

10

22-Feb-1

1

22-Apr-1

1

22-Jun

-11

22-Aug-

11

22-Oct-1

1

22-Dec-

11

Closing Price Target Price Initiation/Assumption Rating

Rp

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts� stock ratings are defined as follows: Outperform (O): The stock�s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock�s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock�s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock�s absolute total return potential to its current share price and (2) the relative attractiveness of a stock�s total return potential within an analyst�s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock�s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock�s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts� coverage universe weightings are distinct from analysts� stock ratings and are based on the expected performance of an analyst�s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst�s coverage universe consists of all companies covered by the analyst within the relevant sector.

22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 10

**The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse�s distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Outperform/Buy* 46% (60% banking clients) Neutral/Hold* 42% (56% banking clients) Underperform/Sell* 10% (50% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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22 February 2012

Kalbe Farma (KLBF.JK / KLBF IJ) 11

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22 February 2012Asia Pacific/Indonesia

Equity Research

HC0055

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