Indofood Sukses Makmur (INDF IJ)
Constructive Outlook Amid Agribusiness Continued Recovery
- We believe ICBP will continue to be INDF’s primary growth driver, with a projected +5.2% yoy revenue growth in FY25.
- We expect continued recovery in Agribusiness driven by both sustained elevated CPO prices and rising demand.
- We cut our FY25-26F earnings est. by 0.5-8.5% and TP to Rp9,300, but maintain our Buy rating on INDF’s outlook remain constructive.
ICBP remains the backbone, with steady revenue growth
While we anticipate ICBP to grow at a slower pace this year amid current purchasing power conditions, it continues to serve as INDF’s primary growth driver. We estimate ICBP’s revenue to grow by +5.2% yoy in FY25F (contributing 63% to total INDF’s sales) with the assumption of stronger top-line growth in 2H25, driven by our expectation of improving purchasing power due to higher govt spending. Noodles’ margin pressures may persist due to elevated CPO and cooking oil prices along with the impact of the cheaper packaged noodle in Africa. Nevertheless, we believe ICBP can maintain its operational efficiency and thus, an EBIT margin of 20-22% remains achievable, in our view.
Robust Agribusiness is poised to support growth
Following the strong Agribusiness performance in 1H25 (rev +37.5% yoy), we project its FY25 revenue to grow by +7.3% yoy, assuming (2% vol. growth and 5% asp growth). The growth is expected to be driven by sustained elevated CPO prices and rising demand, supported by the ongoing B40 program and upcoming B50 mandate implementation by FY26. The Government plan to roll out B50 next year should further lift biodiesel demand, providing a tailwind for agribusiness sales volume. Additionally, we expect CPO prices to remain favorable underpinned by the IEU CEPA agreement, which will eliminate tariffs on palm oil exports to the EU starting FY27F. Our CPO price assumption stands at MYR4.253/ton for FY25F (vs. MYR4,218/ton in FY24).
Adjusted our earnings forecast by -0.5/-8.5% in FY25/26F
Given the 1H25 achievement, we maintain our revenue projections for FY25/26F, with Agribusiness expected to deliver the strongest growth at +7.3% yoy, followed by ICBP +5.2%, Bogasari +4.5% and Distribution +3.7%. However, at the operating level, we revised our operating profit projections downwards by -2.2/-6.7% in FY25/26F, reflecting adjustments to some key input costs and opex particularly freight & handling as well as salaries expenses.
Maintain Buy with lower TP Rp9,300
We reiterate our Buy rating on INDF with an SOTP-based TP of Rp9,300, as we think INDF’s outlook remains constructive with continued recovery in agribusiness. Currently, the stock trades at 6.3x PE FY25F with 44.7% val. discount to ICBP (vs. 2-year average discount of 54.1%).
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