Mayora Indah (MYOR.IJ Rp2,290; BUY; TP Rp3,200) Expect 1Q24 sales momentum to continue

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Mayora Indah (MYOR IJ)

Expect 1Q24 sales momentum to continue

We expect strong 2Q24 top line to continue (from low base in 2Q23); Apr24 YTD sales indicated to still see strong double-digit growth.
With higher input costs, we lower our FY24-25F gross margins to 26% although NP should grow 5/8% thanks to lower opex and forex gains.
Expect a strong 2H24 on seasonal factors. Maintain Buy with an unchanged TP of Rp3,200 (implying FY24F PE of 21x).

Expect solid 2Q24 from low base, support from export in 2H24

Management is optimistic on 2Q24 prospect and indicated that Apr24 sales looked promising with 4M23 sales showing double-digit growth. However, management is cautiously optimistic on 2H24 outlook, considering the potential increase in input costs (e.g., Cocoa: +190% yoy, Coffee: +52% yoy) that may lead to further price adjustments and pose challenges to maintaining volume growth. We believe the expectation of a strong 2Q24 top line (vs. 2Q23 low base), significant exports contribution (45% of rev.) which could offset currency weakness and seasonal factors (i.e. Mooncake Festival in Oct24 and year-end festivities) should support FY24 earnings.

Lower GPM estimates offset by A&P efficiency and forex gains

We maintain our FY24-25F ASP and volume growth assumptions and expect the prices of major raw materials remain soft in FY24 i.e., Wheat (600cents/bu), CPO (MYR3,852/metric ton) and Sugar (23cents/lb), while we adjust upwards price estimates for Cocoa by 50% to US$6,150/MT (prev US$4,100/MT) and Coffee by 32% to US$3,195/MT (prev US$2,423/MT). With minimal ASP adjustments (0.9-1.2% yoy) and FY24-25F vol assumption of 6.9-7.4% yoy, we expect lower FY24-25 gross margins of 26/26.2%. We expect more conservative new product launches and priority spending on A&P to drive better opex efficiency hence, we forecast lower A&P and Opex/rev spending of 8.4% (prev: 8.8%) and 13.1% (prev: 13.6%) respectively. Overall, these lead to 3.3%/2.7% change in our FY24-25F core net profit to Rp3.3tr (-0.7% yoy) and Rp3.6tr (+10.6% yoy).

Maintain Buy rating on expectation of stronger 2H24.

MYOR’s share price has underperformed JCI by 6.8% YTD, with domestic funds maintaining their overweight position (~+1%) at end of Apr24. We maintain Buy with an unchanged TP of Rp3,200 (implying FY24F PE of 21.3x, at -0.5x SD to the avg 5-y PE) as we see earnings support from greater exposure to export (45% to rev) versus peers (5-8%) to sustain sales volume ahead and offset potential downside from currency weakening.

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