Indofood Sukses Makmur (INDF.IJ Rp 7,800; BUY TP Rp 8,800) CPO price stability and volume growth underpin FY24-25F Outlook

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Indofood Sukses Makmur (INDF IJ)

CPO price stability and volume growth underpin FY24-25F Outlook

Strong volume growth from ICBP and Bogasari, higher CPO prices, and lower fertilizer costs supported INDF's solid 9M24 performance.
We project FY24/25F core profit growth of 5.8% and 9.3% yoy, driven by ICBP and robust performance in the agribusiness division.
We expect INDF will benefit from lower fertilizer costs until 1H25. We maintain a Buy rating with a higher TP of Rp8,800 (FY25F PE of 6.6x).

Expect FY24/25F revenue to grow by +4%/6.2% yoy

We forecast FY24/25F top line growth of 4%/6.2% yoy, mainly driven by ICBP (+7.7%/8% yoy) despite a lower ASP assumption potentially impacting Bogasari FY24F revenue (-2% yoy). Yet, we estimate Bogasari FY25F revenue to grow by 6% yoy amidst stable wheat price (615 cents/bush, based on Bloomberg consensus) with a projected 4% yoy volume growth. For the Agribusiness division, we expect normalizing CPO prices to MYR3,825/ton in FY25 (based on Bloomberg consensus vs. MYR4,005/ton in FY24) and 3% yoy CPO sales volume to drive our projected -3% yoy revenue contraction in FY25.

Expect FY24/25F core profit growth of 5.8%/9.3% yoy

At the operating level, we expect ICBP to maintain its FY24/25F EBIT margin at 22%, driven mostly by volume growth (+6.9%/5.7% yoy). For Bogasari, we expect stable wheat prices and volume growth to maintain the FY24/25F EBIT margin at 7%, still within the company’s guidance of 6-8%. With the outlook for soft FY25F CPO prices and fertilizer prices, we estimate an FY25F EBIT margin of 15% for the agribusiness. Against this backdrop, we forecast FY24/25F net profit growth of 24%/14.9% yoy and core profit growth of 5.8%/9.3% yoy.

Maintain Buy rating with a higher TP of Rp8,800

We expect INDF will benefit from lower fertilizer costs until 1H25, which will sustain a high margin in its agribusiness division. We roll over our valuation to FY25 and maintain our Buy rating with a higher TP of Rp8,800 based on the mid value of SOTP and 45% valuation discount to ICBP. INDF currently trades at FY25F PE of 5.9x (54% disc to ICBP’s 13x). Key risks are soft commodity prices and Rupiah depreciation.

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