Kalbe Farma (KLBF.IJ Rp1,275; BUY TP Rp1,710) 3Q25: In-line; Broad-based Revenue Recovery Offsets Margin Pressure; FY25F Outlook Intact

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Kalbe Farma (KLBF IJ)

3Q25: In-line; Broad-based Revenue Recovery Offsets Margin Pressure; FY25F Outlook Intact

Broad-based 3Q25 revenue rebound managed to offset margin drag due to higher BPJS pharma, non-dairy mix, and elevated selling expenses.
We believe the risks of weak nutritionals revenue and higher BPJS pharma mix are contained, given stronger core profit outlook vs. peers.
We reiterate our Buy rating with an unchanged DCF-based TP of Rp1,710, KLBF still trades at 35/29% below its 10/5-Yr. historical mean P/E.

3Q25 Broad-Based Revenue Recovery Offsets Margin Pressure

KLBF booked Rp8.9tr revenue in 3Q25 (+8% qoq, +13% yoy), beating our best-case estimates of Rp8.6tr (+5% qoq, +10% yoy). Net Profit reached Rp656bn (-27% qoq, +15% yoy), bringing 9M25 to Rp2.6tr (+11% yoy), in-line with our/consensus FY25F estimates (Rp3.5tr, 74% run-rate). Revenue rebounded across all divisions (Prescription/Cons.Health/Nutritionals/Distribution +10%/6%/9%/7% qoq vs. 2Q25 -1%/-20%/-12%/-2% qoq impacted by post-Eid normalization), offsetting lower GPM/OPM (-100bps/-330bps qoq vs. our estimates of -60bps/-240bps). Margin pressure stemmed from: 1) higher unbranded generics (BPJS pharma) mix and competition in branded pharma 2) rising non-dairy mix in nutritionals amid elevated USD-driven raw material costs 3) higher selling expenses opex (+21% qoq vs. +3%/-2% qoq in 1Q/2Q25).

FY25F Outlook Intact to Achieve Stronger Core Profit Growth vs. Peers

Overall 9M25 Revenue/ Net Profit growth of +7%/11% yoy tracks well with mgm’t guidance (+6-8%/6-8% yoy), implying the concerns on 1) weak nutritionals revenue amid higher USD input costs 2) pressure in Prescription margin from BPJS demand, appear to be contained. We reiterate our positive view on KLBF as a beaten down blue chip (share price -6.3% YTD) with limited downgrade risks and stronger FY25F core profit outlook vs. peers (+6%vs.+1% yoy). Assuming 10-Yr. 9M historical revenue/ net profit contribution to FY at 74%, FY25F revenue/ net profit could be delivered at Rp35.0/ 3.5tr (vs. cons’ FY25F Rp34.8/3.5tr), implying 4Q25 revenue of ~Rp9.0tr (+2% qoq/+8% yoy) and net profit of ~Rp919bn (+40% qoq/ +7% yoy).

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

While KLBF now trades at 16.8/15.8x FY25F/26F P/E, at 15%/17% premium vs. local consumer peers average of 14.6/13.5, and at 20/18% premium to LQ45’s P/E of 12.6/11.4x, its valuation remain relatively undemanding compared to its 10/5-Yr. historical mean at ~25.7x/23.6x. We believe this is unwarranted given its feasibly stronger core profit outlook and defensive prescription business, supported by aging demographics and “below-the-line” marketing moat. Key risks: Weaker IDR/top-line, overrun opex, potential MSCI exclusion outflow.

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