Indofood CBP (ICBP IJ)

4Q25 Rebound Lifts FY26F Outlook, but Impact from Geopolitical Tension Remains a Risk

4Q25 rebound signals some demand recovery

ICBP posted stronger sales growth of +8.9% yoy in 4Q25, the highest quarterly growth since 4Q24, indicating some demand recovery, particularly within the dairy and food seasonings division during the quarter. Management attributed this improved momentum partly to continued Govt spending, including fiscal support and free meal program, alongside a normalization in consumer spending post 1H25 softness. ICBP ended up closing FY25 with +3.1/ 30.3% sales and earnings growth, with gross margin falling due to higher raw materials costs, especially cooking oil, potato and CPO prices. Nevertheless, FY25 operating margin of 20.9% remained within management guidance’s of 20-22%.

Constructive FY26F outlook amid 4Q25 momentum

During the call, management guided FY26F sales growth of 5-7%, with EBIT margin maintained at 20-22%. We view the implied acceleration in sales growth as reflecting a more optimistic outlook, supported by the strong 4Q25 momentum and post-Eid demand trends that have so far tracked in line with expectations. Nonetheless, the company noted that the guidance was finalized prior to the escalation of the Middle East conflict.

Middle East escalation impact is limited for now  

Management indicated that the impact of Middle East escalation on Pinehill’s operations has so far been immaterial, despite the situation remaining fluid and evolving. Overall, business activities have largely continued as normal, with raw materials supply chains remaining stable to date. The company typically secure 3-6 months of key raw materials and has also locked ~50% of its FY fertilizer requirements for the agribusiness. Therefore, at this stage, management noted that it is still too early to assess the potential financial impact over the short to medium term. Notably, overseas noodle volume grew by 7% yoy in FY25, with majority of the contribution coming from Pinehill. We adjusted our FY25/26F core profit forecast by +0.1/-3.6%, reflecting modest improvement in gross and ebit margin. This translates to a flat core profit growth of +0.4% in FY26F before improving to +8.1% in FY27F.

Maintain Buy with lower TP of Rp10,500

Despite potential headwinds from ongoing Middle East tensions, we believe ICBP retains some pricing power, particularly for its noodle products which have yet to see price adjustments this year. We lowered our TP to Rp10,500 following our estimate revisions, implying FY26F PE of 11.2x (-1std of 3yr mean). Tactical (3M) view: N. Seasonal qoq slowdown post-Eid and continued volatility in key raw material prices due to the geopolitical risks could pressure margins.

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