Indonesia Finance Minister recently announced 2021 excise tax hike by an average of 12.5% with no excise simplification, and the new retailing price will follow the hikes. SKM I rise 16.9%, SPM 1 rise 18.4%, while SKT excise tax remains the same as the previous year. The new excise tax policy will take effect on Feb 1, 2021.

Taxes for SKM and SPM will rise next year, and it gives pressure on HMSP and GGRM’s financial performance as the companies are categorized in the first-tier producer. From the first-tier competition, the absence of SKT tax hikes would give more benefit to HMSP rather than GGRM. SKT contributes 23% of HMSP revenue while in GGRM, SKT contributes 7.7% of the company’s revenue in 9M20.

Overall, we assume that consumers would be more likely to choose the lower-tier cigarette products due to the widening price gap between the first tier to the other tier. In this case, we believe WIIM as a second-tier producer and ITIC with its affordable tobacco product would be benefited from the current situation.

PT. Phillip Sekuritas Indonesia 
Research Department
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Jl. Jend. Sudirman Kav. 33A, 10220 Jakarta
Ph: (62 21) 57900 800
Email: research@phillip.co.id
Website: www.poems.co.id