PT Victoria Care Indonesia (VICI IJ) Adapting to shifts in consumers behavior (NOT RATED)

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PT Victoria Care Indonesia (VICI IJ)

Adapting to shifts in consumers behavior

VICI reported a 6.7% yoy revenue increase in 1H24, driven by hair care growth despite a 2.3% decline in personal care due to competition.
The mgmt. plans to shift partial promotional costs to offline stores due to changing consumer behavior, while keeping A&P costs at 18% of rev.
Management maintains FY24 guidance for 11% EPS growth, with revenue growth of 12-15%, a GPM of 55% and NIM of 13%.

Shifting consumer behavior necessitates strategic adjustments

VICI reported a +6.7% yoy revenue increase in 1H24, attributed to a combination of volume growth and 5% ASP increase at end of FY23, driving a 10% rise in net profit to Rp9bn. The hair care segment led the growth with a 17% yoy increase, boosted by a new product launch (Miranda) and a new sales channel (i.e., Sociolla) for the CBD brand, while the personal care and antiseptic segments’ revenues declined by 2.3% yoy due to stiffer competition. In our recent call with mgmt., it also mentioned a consumer shift from online to offline purchases through modern trade channels, prompting less aggressive online sales and a strategic reallocation of partial promotional spending towards offline stores, while maintaining advertising costs at 18% of revenue.

Strategic plans aim for a 4Q24 rebound

The mgmt. indicated flat yoy sales in Jul24, while Aug24’s are still expected to soften. However, it anticipates a sales rebound in 4Q24, benefiting from a low base due to last year’s TikTok Shop ban. VICI plans to increase its ASP by around 5% at the end of FY24 and aims to launch new products targeting men, along with new offerings under its Miranda and CBD brand. Additionally, the company is preparing to introduce new packaging for its Herborist products to support the consumer segment.

Premium valuation; mgmt. maintains optimistic FY24 growth projections

VICI maintains FY24 guidance for double-digit revenue growth of 12-15%, a gross margin of 55%, and a net margin of 13%, translating to an expectation of 11-14% yoy net profit growth. Management remains optimistic about achieving these targets while closely monitoring sales performance from Sep24 onwards. VICI trades at FY24 an annualized PE of 21.5x, a premium to the consumers sector’s 16.2x (with projected average EPS growth of 11%).

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