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Indofood CBP Sukses Makmur (ICBP IJ) (Buy) - Consistent double-digit core profit growth

Indofood CBP Sukses Makmur (ICBP IJ) (Buy) - Consistent double-digit core profit growth

Food Beverages n Tobacco SH JW SC 479 27th Feb, 2025

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Consistent double-digit core profit growth

Factoring in potential forex loss into our forecasts; maintain Buy with a lower TP of IDR18,700

Benefiting from affordability advantage

We believe the government’s commitment to alleviate the wealth level of the low-end income class through social aid (PKH, BPNT, free rice, and electricity discount), free nutritious meal, and agriculture (+10% rice and corn selling price hike this year) programs will eventually translate into higher demand for affordable branded low-ticket-items, including instant noodles category, given the low base factor (read: Follow the money). We note the low-end income group, especially in the agriculture sector (~40mn work force), is the biggest population class in Indonesia and, hence is the largest potential market for FMCGs. Moreover, the middle-income class would increasingly prefer value-for-money FMCG items, in our view, due to more consumptive behavior and less government incentives. Hence, we think the current down-trading trend might persist, and this should drive the demand for instant noodles due to its affordability, strong flavour, and versatility (an alternative to a main meal or snacking). We forecast ICBP’s sales volume to continue growing in Indonesia, which was already positive in early-2025, based on our survey, and may beat the high base performance last year during the Presidential election. 

Pricing power to stabilize growth

ICBP has raised its instant noodles prices by ~4% in Feb-24, to partly offset the price increase in CPO, chilli, and USD-related costs. We believe this price hike would not affect demand as it translates into only ~IDR100 per pack, which we deem trivial to grassroots’ wallet. ICBP’s strong pricing power has helped the group to continue expanding its EBIT margin in the last decade (see Fig. 2) owing to operating leverage advantage.

Maintain Buy rating; forecasting sustainable double-digit core profit growth

We estimate ICBP will record a double-digit core profit CAGR of 15.5% in 2020-2024F, and low-mid-teens core profit growth in FY25-26F. Growth, in our view, will likely come from ASP hikes + more money channelled to Indonesia grassroots + middle income class downtrading + Pinehill (unlisted) market penetration. We lower our FY24F EPS by 23% to incorporate potential forex losses and impairment (non-cash items), as USD has strengthened significantly vs. IDR. Pegging an unchanged 2025F P/E of 20x (+1SD to its five-year mean), our new TP now stands at IDR18,700. Given potential upside of more than 78%, we maintain our Buy rating. The stock currently trades at 11.2x 2025F P/E. A downside risk would be an unstable political situation in the Pinehill region.

Year-end 31 DecFY23FY24FFY25FFY26F
Currency (IDR)ActualOldNewOldNewOldNew
Revenue (bn)67,91074,41972,62781,96378,31692,07186,687
Reported net profit (bn)6,9919,2337,14911,27310,89213,05212,452
Normalised net profit (bn)6,9919,2337,14911,27310,89213,05212,452
FD normalised EPS599.44791.71613.03966.65934.011,119.201,067.76
FD norm. EPS growth (%)52.432.12.322.152.415.814.3
FD normalised P/E (x)17.5–17.1–11.2–9.8
EV/EBITDA (x)10.4–9.6–8.5–7.5
Price/book (x)3.0–2.8–2.4–2.1
Dividend yield (%)2.9–2.9–4.4–5.1
ROE (%)18.121.216.822.622.723.022.5
Net debt/equity (%)59.944.954.333.735.022.522.4
Source: Company data, Verdhana estimates

Key data on Indofood CBP Sukses Makmur

Income statement (IDRbn)
Year-end 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
Revenue
64,798
67,910
72,627
78,316
86,687
Cost of goods sold
-43,005
-42,784
-45,715
-48,791
-53,531
Gross profit
21,792
25,126
26,912
29,525
33,156
SG&A
-9,378
-10,352
-10,444
-11,334
-12,870
Employee share expense
0
0
0
0
0
Operating profit
12,414
14,775
16,468
18,191
20,286
EBITDA
13,743
16,151
17,763
19,612
21,874
Depreciation
-1,329
-1,377
-1,295
-1,421
-1,588
Amortisation
0
0
0
0
0
EBIT
12,414
14,775
16,468
18,191
20,286
Net interest expense
-5,944
-531
-1,052
-1,040
-738
Associates & JCEs
0
0
0
0
0
Other income
1,055
-2,799
-3,665
-526
-543
Earnings before tax
7,525
11,445
11,751
16,624
19,005
Income tax
-1,803
-2,980
-2,585
-3,657
-4,181
Net profit after tax
5,722
8,465
9,166
12,967
14,824
Minority interests
-1,135
-1,475
-2,016
-2,075
-2,372
Other items
0
0
0
0
0
Preferred dividends
0
0
0
0
0
Normalised NPAT
4,587
6,991
7,149
10,892
12,452
Extraordinary items
0
0
0
0
0
Reported NPAT
4,587
6,991
7,149
10,892
12,452
Dividends
-2,294
-3,495
-3,575
-5,446
-6,226
Transfer to reserves
2,294
3,495
3,575
5,446
6,226
Valuations and ratios
Reported P/E (x)
26.7
17.5
17.1
11.2
9.8
Normalised P/E (x)
26.7
17.5
17.1
11.2
9.8
FD normalised P/E (x)
26.7
17.5
17.1
11.2
9.8
Dividend yield (%)
1.9
2.9
2.9
4.4
5.1
Price/cashflow (x)
–
16.4
18.0
11.5
10.4
Price/book (x)
3.4
3.0
2.8
2.4
2.1
EV/EBITDA (x)
12.6
10.4
9.6
8.5
7.5
EV/EBIT (x)
14.0
11.4
10.3
9.1
8.0
Gross margin (%)
33.6
37.0
37.1
37.7
38.2
EBITDA margin (%)
21.2
23.8
24.5
25.0
25.2
EBIT margin (%)
19.2
21.8
22.7
23.2
23.4
Net margin (%)
7.1
10.3
9.8
13.9
14.4
Effective tax rate (%)
24.0
26.0
22.0
22.0
22.0
Dividend payout (%)
50.0
50.0
50.0
50.0
50.0
ROE (%)
13.0
18.1
16.8
22.7
22.5
ROA (pretax %)
12.6
14.8
16.1
17.0
18.2
Growth (%)
Revenue
14.1
4.8
6.9
7.8
10.7
EBITDA
4.3
17.5
10.0
10.4
11.5
Normalised EPS
-28.3
52.4
2.3
52.4
14.3
Normalised FDEPS
-28.3
52.4
2.3
52.4
14.3
Source: Company data, Verdhana estimates
Cashflow statement (IDRbn)
Year-end 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
EBITDA
13,743
16,151
17,763
19,612
21,874
Change in working capital
-11,800
7,493
-1,097
11,652
-2,208
Other operating cashflow
-7,067
-16,185
-9,878
-20,620
-7,876
Cashflow from operations
-5,124
7,460
6,789
10,643
11,790
Capital expenditure
-1,674
-1,566
-2,095
-2,921
-3,588
Free cashflow
-6,798
5,893
4,694
7,723
8,202
Reduction in investments
-101
2,800
17
-263
-54
Net acquisitions
0
0
0
0
0
Dec in other LT assets
0
0
0
0
0
Inc in other LT liabilities
0
0
0
0
0
Adjustments
228
-869
-371
-205
-407
CF after investing acts
-6,671
7,825
4,340
7,255
7,741
Cash dividends
-3,200
-2,294
-3,495
-3,575
-5,446
Equity issue
0
0
0
0
0
Debt issue
-231
-489
-106
-95
-86
Convertible debt issue
0
0
0
0
0
Others
5,464
-1,430
-579
2,378
2,708
CF from financial acts
2,034
-4,212
-4,180
-1,292
-2,824
Net cashflow
-4,637
3,612
160
5,963
4,917
Beginning cash
20,378
15,741
19,353
19,514
25,477
Ending cash
15,741
19,353
19,514
25,477
30,394
Ending net debt
30,088
24,399
24,117
18,102
13,156
Balance sheet (IDRbn)
As at 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
Cash & equivalents
15,741
19,353
19,514
25,477
30,394
Marketable securities
0
0
0
0
0
Accounts receivable
7,228
7,524
9,905
10,547
11,675
Inventories
7,132
6,329
7,033
7,870
8,922
Other current assets
969
3,566
4,407
4,969
5,655
Total current assets
31,070
36,773
40,858
48,863
56,646
LT investments
11,169
8,369
8,352
8,615
8,669
Fixed assets
14,521
14,711
15,511
17,011
19,011
Goodwill
54,006
54,006
54,006
54,006
54,006
Other intangible assets
1,797
1,684
1,531
1,403
1,320
Other LT assets
2,742
3,723
4,247
4,580
5,069
Total assets
115,306
119,267
124,506
134,478
144,722
Short-term debt
1,312
568
558
595
653
Accounts payable
4,725
4,952
5,172
5,327
5,625
Other current liabilities
3,997
4,944
4,919
5,164
5,524
Total current liabilities
10,034
10,464
10,649
11,086
11,802
Long-term debt
44,516
43,184
43,073
42,983
42,897
Convertible debt
0
0
0
0
0
Other LT liabilities
3,282
3,514
3,104
3,316
3,641
Total liabilities
57,833
57,163
56,826
57,385
58,340
Minority interest
20,954
21,354
23,276
25,371
27,654
Preferred stock
0
0
0
0
0
Common stock
6,569
6,569
6,569
6,569
6,569
Retained earnings
29,343
34,111
37,765
45,083
52,089
Proposed dividends
0
0
0
0
0
Other equity and reserves
607
71
71
71
71
Total shareholders' equity
36,519
40,750
44,404
51,722
58,728
Total equity & liabilities
115,306
119,267
124,506
134,478
144,722
Liquidity (x)
Current ratio
3.10
3.51
3.84
4.41
4.80
Interest cover
2.1
27.8
15.6
17.5
27.5
Leverage
Net debt/EBITDA (x)
2.19
1.51
1.36
0.92
0.60
Net debt/equity (%)
82.4
59.9
54.3
35.0
22.4
Per share
Reported EPS (IDR)
393.36
599.44
613.03
934.01
1,067.76
Norm EPS (IDR)
393.36
599.44
613.03
934.01
1,067.76
FD norm EPS (IDR)
393.36
599.44
613.03
934.01
1,067.76
BVPS (IDR)
3,131.44
3,494.30
3,807.61
4,435.11
5,035.86
DPS (IDR)
196.68
299.72
306.52
467.01
533.88
Activity (days)
Days receivable
39.6
39.6
43.9
47.7
46.8
Days inventory
55.1
57.4
53.5
55.7
57.2
Days payable
39.4
41.3
40.5
39.3
37.3
Cash cycle
55.4
55.8
56.9
64.1
66.7
Source: Company data, Verdhana estimates
Company profileICBP is a leading player in consumer branded products sector in Indonesia with diverse business range including noodles (73% of sales), dairy (15% of sales), snack foods (6% of sales), food seasonings (6% of sales), nutrition and special foods (2% of sales), and beverages (4% of sales). As part of the Indofood group, ICBP operations are supported by its parent company’s extensive raw materials production and finished product distribution network allowing them to meet market demands in a timely and efficient manner. ICBP sells their products mostly through general trade channel (~70% of sales). ICBP is also geographically diversified, through existing export business, as well as the new markets that they have entered through the Pinehill acquisition (~22% of sales). Pinehill Group’s core markets in Nigeria, Ghana, Saudi Arabia, Egypt, Kenya, Serbia, Morocco, and Turkey markets have a combined population of 550 million people with access to another 335 million people in the surrounding markets.
Valuation MethodologyWe derived our TP of IDR18,700 based on 20.0x 2025F P/E (equivalent to +1SD to its five-year mean). We use JCI as our benchmark index.
Risks that may impede the achievement of the target priceA downside risks would be an unstable political situation in Pinehill region.
ESGICBP is an ESG leader on product safety and quality as well as packaging material and waste, while still a laggard in corporate governance, corporate behaviour and product carbon footprint. To improve the rating, ICBP has been managing to reduce their carbon footprint from heavy industrial operations through greenhouse gas emissions. As the subsidiary of INDF, ICBP also involved in the Waste Bank program which focuses on managing waste and water usage.

Fig. 1: ICBP - core profit growth forecast
Expecting a continuous double-digit core profit growth
Source: Company data, Verdhana estimates

 

Fig. 2: ICBP - EBIT margin trend
Pricing power may push margin structurally
Source: Company data, Verdhana estimates

 

Fig. 3: Consumer companies FCF yield (2023)
ICBP has a strong position
Source: Company data, Verdhana research

 

Fig. 4: When do you usually eat instant noodles?

Source: JAKPAT, Verdhana research

 

Fig. 5: CPO and wheat price index (2023 = 100)

Source: Bloomberg Finance L.P., Verdhana research

 

Fig. 6: Foreign to local ownership ratio and 6M ADTV

Source: KSEI, Bloomberg Finance L.P., Verdhana research

 

Fig. 7: ICBP - P/E band

Source: Bloomberg Finance L.P., Verdhana estimates

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.


This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


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Rating Table

Rating
Remains
Buy
Target price
Reduced from IDR 19,300
IDR 18,700
Closing price
26 February 2025
IDR 10,500
Implied upside+78.1%
Market Cap (USD mn)7,482.4
ADT (USD mn)2.8

Relative performance chart



Source: LSEG, Verdhana
M cap (USDmn)
7,482.4
Free float (%)
19.5
3-mth ADT (USDmn)
2.8
(%)
1M
3M
12M
Absolute (IDR)
-8.1
-12.3
-9.1
Absolute (USD)
-9.2
-14.7
-13.2
Rel to Jakarta Stock Exchange Composite Index
-0.3
-3.5
0.2

Research Analysts

Sandy Ham (sandy.ham@verdhana.id)

Jody Wijaya (jody.wijaya@verdhana.id)

Samuel Christian (samuel,christian@verdhana.id)

Tags: FOOD AND BEVERAGE, ICBP, ICBP JK ICBP IJ, Sandy Ham, Jody Wijaya, Samuel Christian
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