Kalbe Farma (KLBF.IJ Rp 1,435; BUY TP Rp 1,710) A More Conservative FY25 Outlook; Still Attractive LT Growth Profile

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Kalbe Farma (KLBF IJ)

A More Conservative FY25 Outlook; Still Attractive LT Growth Profile

Despite 2Q25 slowdown in Cons. Health and Nutritionals revenue, 1H25 earnings were on track, supported by strong 1Q25 margin.
Mgmt lowered its FY25F revenue/ NPAT growth guidance to 6-8% yoy (from 8-10% yoy prev.), leading to slight cut on our FY25F NPAT by -2%.
Maintain Buy with a slightly lower DCF-based TP of Rp1,710. LT Thesis as Defensive Compounder to Remain Intact.

Controlled Input Costs Helped Sustain 1H25 Earnings

KLBF booked 1H25 net profit of Rp1.97tr (+9% yoy), reaching 55%/56% of our/cons FY25F. 1H25 top-line growth of +5% yoy missed the company’s previous guidance of 8-10% yoy, due to softer 2Q25 revenue (-7%qoq) from slowdown in high-margin segment revenues (Consumer Health/Nutritionals -20%/-12%qoq). Nonetheless, this was still offset by strong 1Q25 gross margins, supported by controlled input costs and better Consumer Health revenue seasonality in 1Q25. A one-off gain on the sale of land asset, to its associate company, Livzon Pharma of Rp79bn, also helped maintained net margin at 11.6% (higher than our 1H25 est, of 11.3%). We view this as positive progress of LT plan of domestic API production through knowledge transfer from Livzon.

Mgm’t Lower Guidance; Minor FY25F NPAT Downward Revision

Management revise down their FY25F revenue/NPAT growth guidance to 6-8% (previously at 8-10%yoy), noting a potentially slower recovery in Nutritionals segment along with USD volatility risks. Incorporating 1H25 results, we lower our FY25F revenue forecast to +5%yoy (from +8% previously), while factoring in lower input costs and higher other income items, resulting in a slight 2% downward revision of our NPAT to Rp3.5tr (from Rp3.6tr prev.). Our new NPAT forecast implies 44% of FY25 earnings to be delivered in 2H25, which we see as plausible given the historically even-distribution of 1H/2H NPAT (Exhibit 6).

Maintain Buy on Intact Long-Term Defensive Compounder Thesis

We maintain our Buy rating with a slightly lower DCF-based TP of Rp1,710 (vs. Rp1,780 prev.), as we see KLBF’s LT defensive compounder thesis remaining intact through; 1) a strong distribution and marketing network to doctors, solidifying moat for its positioning in the industry, due to the “below-the-line” marketing nature of prescription pharmaceuticals, and 2) higher healthcare expenditure as NCD prevalence increases with a structurally aging population. We also believe KLBF’s 3-year earnings CAGR of 11% is attractive as current valuation of 18.9x FY25F P/E is also at 28% discount to 10-year mean. Further IDR strengthening may act as catalyst given the share price high correlation with USD/IDR movement (Exhibit 8). Risks include: Weak top-line growth, higher BPJS contributions, slower cost-efficiency, weak IDR.

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