Capturing in-home consumption trend

As noted in our previous report (1Q25 review — Shifting to in-home consumption), we observed that middle-income consumers are moving to in-home consumption activities in order to save money. This situation creates higher demand for frozen/chilled processed meat products (Fig. 1), given the good taste and practicality to cook at home; those products are also cheaper than fresh chicken/beef as frozen food can be stored and shared for long. We estimate that CMRY, through its Kanzler brand, can capture the trend, resulting in very strong +31% y-y sales growth for Kanzler in 1Q25 (vs. +13% y-y estimated by the industry); the double-digit sales growth momentum should resume in 2Q25F, in our view. We note that Kanzler now has a more complete product range with its recent launches of affordable packs priced at IDR5,000, which we think is a perfect timing to capture the middle-income-class’ downtrading trend. On top of that, CMRY is equipped with around 7K Miss Cimory agents who can go door-to-door to customers’ houses, catering to in-home consumption activities.

Dairy sales start to recover

We expect CMRY’s dairy sales to slightly rebound in 2Q25F, with positive y-y growth (vs. -11% y-y in 1Q25), which is partly driven by a slowdown in the market leader’s (Ultrajaya [ULTJ IJ, Buy]) promotions roll-out. However, given the middle-income downtrading trend and lesser out-of-home spending (i.e., ready-to-drink beverages), we estimate that CMRY’s overall dairy sales growth this year should only reach low-single-digit growth y-y. Most of the growth will be driven by volume, especially on the back of market share gains in 2Q25F onwards amid the industry slowdown.

Sales channels continue to expand

In our view, general trade (GT) would be the main growth channel for CMRY this year on the back of: 1) additional new point of sales – the company can easily reach 200K stores by FY25F (vs. 167K in 4Q24 and 178K in 1Q25); 2) more affordable products are mostly launched in GT, which is suitable for the current middle-income class downtrading trend; and 3) more government stimulus to lower-tier cities and rural areas makes GT a more relevant channel to benefit due to proximity advantages. Domestically, CMRY still has plenty of room to grow outside Java, especially in encouraging areas like Sulawesi Island which has one of the fastest growing GDP growth in a decade. The company has also slowly expanded its business in the Philippines, which currently still contributes ~1% of sales; management views that its yogurt products have received strong acceptance in this region. Lastly, we believe that the Miss Cimory channel should do well this year, backed by the in-home consumption trend, not to mention the higher productivity given the more new SKUs.

Margin risks should be manageable

We estimate 2Q25F gross profit margin (GPM) to be similar to the 1Q25 level, though we might start to see a lower GPM in 3Q25F due to higher USD costs and more expensive powder milk prices. However, we think overall EBIT margin will likely be stable as management can adjust its A&P spending to compensate for the lower GPM. All in all, we do not see any major risks to CMRY’s profitability for this year.

Maintain Buy

In our view, it would be impressive if CMRY maintains its double-digit earnings growth amid the economic slowdown. We forecast CMRY’s NPAT could still grow +17% y-y in FY25F. We reaffirm our Buy rating and TP of IDR6,700, using a FY25F target P/E of 30x. Currently, the stock is trading at 21.4x FY25F P/E (EPS: IDR224), which is justified by its consistent double-digit growth and feasibility even amid the economic slowdown. Downside risks: higher-than-expected USD costs.

Fig. 1: Indonesia – estimated total sales of frozen and chilled processed meat products

Fig. 2: CMRY’s dairy sales trend

Fig. 3: CMRY – sales channel breakdown (1Q25)

Fig. 4: CMRY – GT outlets (in thousands)

Fig. 5: CMRY – Miss Cimory agents

Fig. 6: CMRY – EBIT margin trend

Fig. 7: CMRY – forward P/E band

Fig. 8: CMRY – annualized P/E vs ROE trend

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. 

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Sandy Ham (sandy.ham@verdhana.id)

Jody Wijaya (jody.wijaya@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)