3Q25F: Out-of-home products sales start recovering

Our survey of 23 FMCG firms suggests that consumption in 3Q25F was better q-q and y-y; we estimate overall FMCG sales growth at +2.5% y-y in 3Q25F (vs +0.9%/+0.4% y-y in 1Q/2Q25), supported by out-of-home products sales recovery (i.e., dairy and beverages). Better buying power conditions were driven by an acceleration in government expenditure (+1.5% y-y in 8M25 vs -12% y-y in 5M25), which encouraged more spending outside of home. The government’s free nutritious meal program also showed substantial budget realization progress from IDR12tn in Aug-25 to IDR20tn in Sep-25 (vs IDR171tn target FY25). Considering a low budget realization, we expect the government to push bigger spending in 4Q25 to achieve its target; we believe more money supply will improve the buying power of the mid-to-low-income class. Low-ticket items such as FMCG may enjoy increasing sales, while a spillover impact on discretionary items could lag, in our view. We believe Cisarua Mountain Dairy (CMRY IJ, Buy) and Mulia Boga Raya (KEJU IJ, Buy) willcontinue to post outstanding performance at double-digit earnings growth, which would then beat consensus estimates. We observe that both companies have outperformed peers, gaining market share on the back of continuous product innovations.

Big caps face higher risks from foreign outflow

We project there will be more conglomerate stocks that are eligible to enter the Indonesia MSCI and FTSE indexes. Such inclusion would lower the weighting of existing stocks or even kick out some existing ones, which may trigger passive fund outflow. Fundamentally, we still like FMCG big caps, given undemanding valuations and earnings improvement; however, we suggest investors gauge points of entry and the risks of potential passive outflow. Our pecking order in big caps would be Kalbe Farma (KLBF IJ, Buy) > Indofood (INDF IJ, Buy) > Indofood CBP (ICBP IJ, Buy) > Alfamart (AMRT IJ, Buy) > Unilever Indonesia (UNVR IJ, Neutral). We expect KLBF to record strong sales growth in consumer health, which may support margins amid higher raw material costs, not to mention undemanding valuation. However, we also want to remind investors that KLBF, in our view, has a high chance to be deleted from MSCI in the upcoming review. INDF has strong earnings support from its agribusiness division, as we turn more bullish on CPO prices going forward. ICBP currently trades at what we consider to be a very cheap valuation; fundamentally, we expect higher promotion costs in Pinehill (unlisted) and increasing CPO costs may put more pressure on margin; ICBP also has a high chance to be excluded from MSCI, in our view. AMRT will have more stable earnings growth from 3Q25F onwards, especially post-capex cycle; however, the main risk would be potential unfavorable use of cash. UNVR may record positive sales growth in 2H25F due to a low base, however, we still project market share erosion in the medium term, given tougher competition in the home and personal care market.

We prefer small-mid-caps FMCG stocks

As mentioned above, we prefer small-mid-caps over big-caps due to minimal outflow risks. Our pecking order would be CMRY > KEJU > Ultrajaya (ULTJ IJ, Buy) > Alfamidi (MIDI IJ, Buy) > Mayora Indah (MYOR IJ, Buy) > Sariguna Primatirta (CLEO IJ, Buy) > Multi Bintang Indonesia (MLBI IJ, Buy) > Sariroti (ROTI IJ, Buy). CMRY is our top pick, as the company may beat the consensus forecast again, thanks to a strong sales rebound for the dairy segment. KEJU is our second pick on the back of a better sales mix (driven by higher block cheese demand at a higher margin level) and stable double-digit sales growth (both in retailers and food services), with its earnings result likely to beat market expectations. Our third choice is ULTJ, on undemanding valuation and a sales recovery, as we expect a rebound in out-of-home products sales; we expect its A&P-to-sales ratio will normalize, boosting margin in 2H25F. We also still like MIDI – less burden from Lawson (unlisted) and stronger growth from outside its Java footprint will drive medium term growth, in our view; a risk would be more cost pressure from a potential minimum wage hike. For MYOR, sales could be lower than market expectations, dragged down by the China and Vietnam markets; however, margin recovery and a significant buyback program could be catalysts to support the share price. Sidomuncul (SIDO IJ, Buy) currently is trading at a relatively undemanding valuation, and on top of that we may see a better sales growth trajectory in 2H25F, underpinned by the herbal business. CLEO may book stronger sales growth in 2H25F, driven by new products, while higher promotion program continues due to weaker demand in beverages industry and tougher competition. MLBI provides high dividend yield of 9-10%, but future earnings growth could be challenging, given tougher competition from local players. ROTI may suffer the weakest performance in the medium term, in our view, due to market share erosion and an elevated return rate.

Fig. 2: FMCG 3Q25F overall sales y-y growth forecast

Fig. 3: Government expenditure seasonality – slower expense rollout in the 1H25, with acceleration starting to be seen in 3Q25F

Fig. 4: Free meal program progress

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)

Samuel Christian (samuel.christian@verdhana.id)

Jody Wijaya (jody.wijaya@verdhana.id)