CMRY has largely covered modern trade (MT) stores in Indonesia, which we believe is a suitable market for its premium products; currently MT remains the biggest sales contributor of the company at 49%. CMRY’s growth in MT should be driven by repeat orders and increased number of chiller and freezer availability. General trade (GT; 33% of CMRY's sales) will be the key focus market for CMRY, in our view; GT remains the largest pool of market value for Indonesia FMCG, potentially reaching ~IDR550tn in FY24F (vs. ~IDR300tn in MT), in our view. Currently, CMRY covers only 160K stores in GT (vs. large FMCG firms such as Wings Group [unlisted], Mayora Indah [MYOR IJ, Buy], and Indofood CBP [ICBP IJ, Buy] with a coverage of ~1,000K stores each); hence, we believe management’s target to add 20K stores this year is feasible (see Fig. 1), given its low base. Moreover, the company adds more affordable products in GT like yogurt stick and smaller size Kanzler to strengthen its bargaining power in mom-and-pop stores. Margin-wise it has a similar level in MT; GT might require higher promotion cost to compete but it does not need to pay expensive listing fee. In the medium term, we believe GT’s sales contribution can surpass MT. On the other sales channel, the company also plans to add more Miss Cimory agents from ~6K in 9M24 to ~9K in FY25F (see Fig. 2); Miss Cimory agents are important for the company not only as a selling channel but also as a part of market R&D. Channel expansion in both GT and Miss Cimory will likely contribute at least ~9% incremental sales this year. 

More high-margin products

CMRY plans to revive its yogurt business through product innovation, i.e. yogurt stick (affordable price and suitable for GT market), squeeze bites (premium yogurt equipped with nata de coco), and Fruitas jelly (jelly drink). These new products have high margin level, and may record 50% GPM by FY25F (vs. 42-45% CMRY blended margin). We believe the higher contribution from high-margin products may buffer the impact of expensive USD costs going forward. 

Structural demand for Kanzler

We observe a strong urbanization trend in Indonesia in the past decade, where currently almost 60% of Indonesia live in urban areas, according to the World Bank. We believe higher consumer mobility in urban areas might accelerate the consumption toward instant/ practical products. We think the Kanzler brand, through ready-to-eat/cook products, can capture structurally strong demand. Hence, in our view, this situation can help to accelerate its Kanzler expansion to GT this year. Management launched affordable size Kanzler in 4Q24 to be relevant among GT customers. Given the strong demand, the company is also building a new production capacity for Kanzler which should be expected to be operated in 4Q25F-1Q26F.

Maintain Buy call given its consistently strong double-digit growth

We believe CMRY will likely record strong +15% sales growth and +20% NPAT growth in FY24F, which are in line with market expectations. We expect Kanzler to continue to lead the company’s sales growth, with dairy likely also showing robust performance in FY24F. We forecast CMRY to book a consistent 15-20% sales and earnings growth in FY25F, backed by additional point of sales (+9%) and new product expansion (+6%). We expect EBIT margin to be stable or slightly decline as higher-margin products like yogurt category can buffer higher USD costs. We also do not think the sugary drink tax can be implemented any time soon. We recommend Buy with a TP of IDR6,700, based on FY25F target P/E of 30x. The stock currently trades at 22x FY25F P/E. Downside risks would be tougher than expected competition.

Fig. 1: CMRY - number of GT outlets (in thousands)

Fig. 2: CMRY - number of Miss Cimory agents

Fig. 3: Indonesia urbanization rate vs CMRY's consumer food sales growth

Fig. 4: CMRY - P/E band

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)