Indofood CBP Sukses Makmur (ICBP IJ)

1H24 Earnings Beat from Solid Volume Growth Across Markets

• 2Q24/1H24 core profit beat was driven by solid volume growth, especially from Noodles in both domestic and overseas markets.
• We raise a 4.9%/3.2% upward revision due to higher volume and margins; expect high margins to sustain amid soft input prices.
• With an undemanding valuation and steady core profit growth, we reiterate our Buy rating with higher TP of Rp13,400 (FY25F PE of 13.8x).

2Q24: A volume-driven strong performance

ICBP reported a strong core profit growth of +35% yoy in 1H24 (2Q24: -27.6% qoq/+13% yoy), beating estimates (57%/60% of BRIDS/Cons FY24F), driven by a +7% yoy revenue growth (2Q24: -14.5%qoq/+11% yoy), primarily from strong 2Q24 volume. Noodles volume grew +11%/7% yoy in 2Q24/1H24, with robust domestic growth of +12%/9% yoy in 2Q24/1H24; overseas vol. grew 9% yoy in 1H24. Pinehill continued its positive trend in sales and volume, as evidenced by the 14%/7% yoy revenue increase in 2Q24/1H24 in the Middle East and Africa, with half contributed by ASP adjustments. ICBP indicated improved conditions for the Pinehill market in 2Q24 following the ASP adjustment in several key markets i.e Egypt, Turkey, and Nigeria, which still reported solid noodles volume growth. The dairy segment also reported volume growth of 6%/7% yoy in 2Q24/1H24, supported by new products in UHT (Indomilk Goguma and Dalgona) and Sweet Condensed Milk. Other divisions, contributing 15% to 1H24 rev., also reported positive vol growth ranging from 2-10%.

FY24-25F: 4.9%/3.2% upward revision on higher volume and margins

Following strong 1H24 volume and mgmt’s indication of no urgency to further adjust prices this year due to soft input prices, we have raised our FY24/25F volume growth to 5.4%/5.3% yoy (from 4.4%/4.6%), with lower ASP growth of 1.8%/2.4% from 2.4%/3.9% yoy prev. We also estimate higher gross margins of 70/60bps in FY24/25F. Additionally, we forecast lower A&P/rev of 3.5%/3.6% from 3.8%/3.7% prev. This results in a projected FY24/25F core profit growth of 13.6%/7% yoy (4.9%/3.2% upward revision).

Reiterate our Buy rating with a higher TP of Rp13,400

In 2H24, we expect ICBP to continue benefiting from the continued positive sales trend in the Pinehill markets, driven by stronger seasonality toward the end of year (2H21-23 comprised of 52-56% of Pinehill FY rev.). Meanwhile, in the domestic market, product affordability and the growing preference for local FMCG products will continue to sustain sales volume. On the back of these factors, we maintain our Buy rating with a higher DCF-based TP of Rp13,400 (implying FY25F PE of 13.8x) as we roll over our valuation.

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