Kalbe Farma (KLBF IJ)

A Beaten Down Blue Chip; Stable IDR Limits EPS Downside Risk

 

  • We view KLBF’s share price decline over the past 3M (-24%) as unwarranted given its resilient 1H25 core profit of +6% yoy vs. peers -7%.
  • KLBF indicates FY25F growth guidance to remain achievable, with our estimates suggesting minimum EPS downgrade risks post-9M25 results.
  • We reiterate our Buy rating on KLBF with Rp1,710 DCF-based TP, the stock currently trades at large discount vs. historical.

 

Unwarranted Share Price Decline Amid Resilient 1H25 Results

We view KLBF’s share price decline for the past 3M (-24%) as unwarranted given its strong 1H25 earnings run-rate to our/cons (55%/56%), with decent 6% core profit growth, compared with pharma and consumer peers’ growth of -7% yoy. While management revised down its FY25F revenue/ EPS guidance to 6-8% yoy from 8-10% yoy, incorporating a more conservative outlook on the top line (vs. 1H25 5% yoy) as Nutritionals segment might take more time to recover (1H25: -3.3% yoy), consensus FY25F estimates were maintained with revenue/ EPS growth of 7.0%/ 9.5%. We believe this should reflect on track 1H25 earnings achievement (+9.4% yoy), driven by lower input costs from stable USD and API price, also a one-off gain on land sale to Livzon, expanding both GPM/NPM. Core profit, however, remain in-line with 51% to our FY25F. Incorporating new guidance, our previous notes have slightly lowered FY25F revenue/EPS growth from 7.6%/ 11.6% to 5.1%/ 9.6%.

 

FY25F Guidance to Remain On-Track; Limited EPS Downgrade Risks

Our latest discussion with mgmt. indicates FY25F growth guidance remain achievable despite: 1) potential challenges in 3Q25F Nutritionals revenue, with higher input costs (skimmed milk), though impact to margins might be delayed as inventory days provide a buffer. 2) Unbranded generics (BPJS pharma) demand still increased which could pressure Prescription’s margin (1H25 at -130bps). KLBF responded by being selective on entering BPJS market. Meanwhile, Consumer Health’s revenue is indicated to be in-line with mgmt. guidance (~9% yoy). Overall, 3Q25 earnings growth is indicated to be at positive yoy trajectory, also given the 3Q24 low-base (-32%qoq;+7%yoy), due to post-Eid normalization in 2Q24. With these indications, we estimate 9M25 net profit to reach Rp2.6-2.8tr (at 73-79% run-rate to our/cons, i.e., In-Line) (Exhibit 1).

 

Reiterate Buy rating with DCF-based TP of Rp1,710

KLBF now trades at 15.6 FY25F P/E, at a 40%/ 35% discount to its 10-Yr./5-Yr. historical mean. KLBF also already budgeted up to ~Rp500bn for stock buyback in May-Dec25. Key risks: Weak top-line growth and IDR, slower cost-efficiency, higher valuation multiples vs. peers and market (Exhibit 2).

 

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