Indofood CBP (ICBP IJ)
A Compelling Entry Point Ahead of the Expected FY26 Recovery
- ICBP’s recent selloff appears overdone, while fundamentals remain intact and 4Q25 should see a seasonal uplift from festive demand.
- We maintain our expectation of improving growth outlook in FY26F, with +6% revenue growth and gradual margin recovery.
- Low funds positioning and trough-level valuation make ICBP an appealing Buy ahead of an improving outlook.
Market reaction overshoots fundamentals?
ICBP’s share price fell another 3.8% this week, extending its YTD correction to –28.6%. While part of the derating reflects 1) muted growth amid soft domestic demand, 2) margin pressure, and 3) its recent MSCI exclusion, we believe the latest move is excessive given no further deterioration in underlying fundamentals. Looking ahead, we expect a better sales performance in 4Q25 vs. 3Q25, supported by the Govt’s cash handout stimulus disbursed in Nov25 to bolster year-end consumption, as well as potentially early orders towards the end of 4Q25 for upcoming Eid festive season in 1Q26.
Improving growth outlook in FY26F
With a more expansionary fiscal stance, higher social assistance, and the Govt’s pro-growth policy pivot, we expect purchasing power to gradually improve in FY26 to benefit consumer staple companies including ICBP. We forecast ICBP’s FY26 revenue to grow by +6.0% yoy, driven by +4.1% vol growth and +1.6% ASP increase, driving a +7.3% yoy core profit growth – a rebound from -11% in FY25F. We also expect a gradual improvement in margins in FY26, supported by slightly moderating to stable potato and CPO prices, alongside continued favorable wheat prices. Additionally, the affordable price positioning of ICBP’s instant noodles should provide greater flexibility for further price adjustments, in our view.
Under-owned, attractive valuation; ICBP remains as top pick in Consumers space
Following the recent sell-off, ICBP has seen a net foreign outflow of Rp217bn mtd bringing the cumulative ytd outflow to Rp2.6tr. Domestic fund positioning in ICBP has reached an all-time low in the past 2 years, before showing a slight uptick since Oct25. Meanwhile, foreign ownership of 0.27% has also reached lowest level in 10 years. From valuation perspective, ICBP remains attractive at 9.1x PE FY26F, trading below -2std of 3yr historical mean. Its valuation premium to INDF has also narrowed, currently standing at ~39% (vs. 5-year average of ~55%). Given the improving growth outlook and the company’s demonstrated resilience during downtrading environments, we view current valuation as unwarranted and present a tactical buying opportunity for investors. Maintain Buy with an unchanged TP of Rp11,500.
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