Indofood CBP (ICBP)
From Demand Headwinds to Fiscal Tailwinds
- Softer domestic and some overseas demand weighed on ICBP’s topline in 3Q25, though margins improved on easing input costs.
- While FY25F topline may fall short of the management’s 7-9% guidance, we believe EBIT margin may reach the upper end of the target (~22%).
- We maintain our Buy call with a revised TP of Rp11,500. We think its current valuation of 9.7x PE FY26F has largely priced in the ST growth softness.
Soft domestic demand weighed on ICBP’s 3Q25 performance
ICBP posted muted sales growth of +0.8% yoy in 3Q25 (vs. 2.2% in 2Q25), reflecting weaker demand particularly in the noodle segment, which contributed ~73% to total sales. With revenue only up by +1.4% yoy in 9M25, we think its FY25 growth may fall short of the company’s 7-9% target. Management noted softer performance in several overseas markets, including Europe, Australia and the U.S, while regions like Asia, Africa and the Middle East continued to post solid growth of +6.2% yoy in 9M25. Despite the soft topline, ICBP delivered sequential margin improvement in 3Q25, supported by normalization in some input costs. With an EBIT margin of 22.6% in 9M25, we expect ICBP to reach the upper end of its 20-22% target range.
Expect better sales performance in 4Q25
We expect the sales performance in 4Q25 to be better compared to 3Q25, partly supported by the Government’s cash handout stimulus which was distributed at the end of Oct25 and potential early orders towards the end of 4Q25 for the upcoming Eid festive season in 1Q25.
FY25-26F earnings forecast revision
We lowered our topline growth assumptions slightly by -1.6/-1.9% in FY25/26F, reflecting the modest 9M25 performance. This results in FY25F rev growth of +3.5% yoy, driven by +2.7% vol growth and +1.0% ASP increase (vs. +3.5% and +1.8% prev). Rising CPO and potato prices continued to post margins risk, particularly for noodles and snack foods’ segments. Consequently, we project gross margin to decline by 100bps yoy to 36% in FY25F. Nonetheless, at the operating level, we believe ICBP may reach its upper range of 22% EBIT guidance, supported by optimized opex. All in all, we lowered our FY25/26F core profit forecast by -4.4/-5.3%, translating to core profit growth of -11% in FY25F before improving to +7.3% in FY26F.
Reiterate Buy with lower TP of Rp11,500
Despite near-term growth headwinds stemming from macroeconomic challenges, we believe ICBP stands to benefit from a potentially more stable fiscal stimulus in FY26. We think ICBP’s current valuation of 9.7x have largely priced in the short-term growth softness. We lowered our TP to Rp11,500 as we roll-forward our valuation to FY26F, still based on 11.7x PE (-1.5sd to 3year mean).
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