STOCK VALUATION OF PT. PANCA BUDI IDAMAN, TBK. BASED ON FREE CASH FLOW TO THE FIRM AND ON RELATIVE VALUATION

• Main Author: Atma Adiwijaya, Adrianus
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/85974
• Institution: Institut Teknologi Bandung

The valuation of PT Panca Budi Idaman, Tbk. (PBID), a leading plastic packaging producer in Indonesia, is a noteworthy scientific matter due to the interplay of legal constraints, environmental concerns, and economic growth. Despite its economic significance, the plastic packaging industry faces challenges from tightening regulations and shifting public attitudes towards environmental sustainability. Indonesia, the largest economy in Southeast Asia, with projections indicating it could become the 7th largest economy globally by 2030, presents a dynamic market where understanding the valuation of key players like PBID is crucial for investors and policymakers. This study provides an in-depth analysis of PBID's financial and market performance from 2017 to 2023 to guide investment choices and public policy formulation. The study is conducted in multiple phases, starting with an internal and external analysis of PBID. The PESTEL framework and Porter's Five Forces model are utilized to assess the macroeconomic and competitive landscape. Internally, solvency, liquidity, and profitability ratios are used to evaluate PBID's financial standing. The primary assumptions include continued economic growth, regulatory landscapes, and market demand for plastic packaging. The hypotheses to be tested are that PBID's stock is undervalued based on intrinsic and relative valuation methods, and that its financial performance has been stable and resilient despite external pressures. The objectives are to determine the intrinsic and relative valuation of PBID's stock, compare it to the market price, and provide investment recommendations. The research employs the Discounted Cash Flow (DCF) method for intrinsic valuation and relative valuation using industry multiples like EV/EBITDA, P/E, and P/B ratios. The external analysis reveals that Indonesia's robust economic growth, regulatory pressures on plastic usage, and environmental concerns significantly impact PBID, while the competitive landscape shows moderate threats from new entrants and substitutes but strong market demand for plastic packaging. The internal analysis indicates that PBID has maintained strong financial health from 2017 to 2023, evidenced by stable profitability, high liquidity ratios, and low leverage, highlighting effective cost management and operational efficiency. ii This study’s involves detailed financial analysis, including projecting future free cash flow to the firm and discounting them to present value using PBID's Weighted Average Cost of Capital (WACC). A comparative analysis with industry peers provides a relative valuation perspective. The relative valuation shows that PBID's stock is undervalued compared to its industry peers, as indicated by an EV/EBITDA ratio of 4.2x, a P/E ratio of 6.6x, and a P/B ratio of 0.9x. The intrinsic valuation, based on Free Cash Flow to the Firm, estimates PBID's stock value at IDR 3,987 per share, significantly higher than the current market price of IDR 1,325 per share, suggesting substantial undervaluation. The research results are expected to validate the hypotheses, demonstrating that PBID's stock presents a buying opportunity due to its strong financial health and strategic market position. This discovery has several implications for science and practice. It provides a robust valuation model for companies in the plastic packaging industry, incorporating both intrinsic and relative valuation methods. The study offers insights into how regulatory and environmental factors impact financial performance and stock valuation in emerging markets. For investors, the findings offer clear investment guidance, emphasizing the importance of thorough financial analysis in undervalued stocks. For policymakers, the research underscores the need for balanced regulatory frameworks that support industry growth while addressing environmental sustainability. Overall, this study enhances the understanding of stock valuation in complex market environments, contributing to more informed decision-making in the financial and regulatory spheres