Indofood CBP Sukses Makmur (ICBP IJ)

5M25 Indicative Performance on Track

• ICBP’s indicative 5M25 performance is on track to meet expectations; we maintain our FY25F +8% revenue and +2.5% yoy core profit growth.
• Relatively benign key input prices, i.e. CPO and wheat should limit near-term cost pressure.
• Reiterate Buy rating and DCF-based TP Rp14,000; ICBP remains our top pick in the Consumer space.

5M25 performance is still on track with the guidance

Our recent discussion with the management indicated ICBP’s noodles volume saw improvement in Apr25 and May25 and remains on track to meet their FY25F guidance. Besides the sales volume, the recent 3-4% ASP adjustment in Feb25 will also help to support revenue growth in 2Q25. Following the relatively benign wheat price (-0.5% ytd, -11.3% yoy) and a drop in CPO price (-17% ytd, -1% yoy), we see limited pressure for ICBP’s margin in the near term.

A resilient FY25F outlook is intact

We believe ICBP shall remain on track to achieve its FY25F target of 7-9% yoy topline growth with the support of both volume and ASP growth of 4.5% and 3.6%, respectively. We maintain our EBIT margin forecast at 22.2% in FY25F (vs. 22.3% in FY24) given the relatively benign key raw input price as well as some opex savings from freight and handling. Factoring in a conservative assumption of lower forex loss and the absence of impairment loss of investments in associates, we expect a +2.5% yoy core profit.

Driving innovation in the Dairy segment

ICBP has recently introduced a new low-sugar kids’ yoghurt product line. While the new launching aligns with the company’s strategy to capitalize on its strong position in the kids’ market, we think it will also support the Dairy division as it has been dealing with intense competition and downtrading in recent years. Our on the ground check on yoghurt pouch products suggests Indomilk’s kids yoghurt was the second most competitive in terms of price after Biokul. So far, there are only two brands of yoghurt pouch that are intended for kids.

Reiterate our Buy rating TP Rp14,000!

We maintain ICBP as our top pick in the consumer space on the back of its defensive nature amid the weak purchasing power environment. ICBP is currently trading attractively at 12.2x PE FY25F (-2SD to 5-year mean) given its resilient earnings outlook. We reiterate Buy rating with our DCF-based TP of Rp14,000 implying 16.1x PE FY25F. Key risks include weaker-than-expected purchasing power which may potentially affect sales volume, and higher volatility on key raw material prices pressuring the overall margins.

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