Sariguna Primatirta (CLEO IJ) (Buy) - Strong earnings growth momentum

Food Beverages n Tobacco SH JW SC NY 507

Strong earnings growth momentum

Fast-growing FMCG firm with potential for 2025-28F NPAT CAGR of +22%; maintain Buy

Five catalysts likely to boost earnings growth

We expect a strong 2026F NPAT growth rate for CLEO of +19% y-y – vs its peers we cover at +14% average growth rate – amid rising cost of imported raw materials. We note five growth catalysts for CLEO this year: (1) Sales volume expansion – we observe a shift in consumption habits from boiled water to packaged water among grassroots population who seek standardized hygiene as well as relatively affordable pricing. Rapid urbanization and improving economic growth in lower-tier cities are driving this transition, in our view. Based on BPS (Indonesia’s statistics bureau) data, only ~45% of Indonesia’s population drink packaged water, which indicates significant market upside potential for CLEO. We note that the rapid increase in packaging costs may have prompted several local players to cut production, providing an opportunity for local players such as CLEO to gain market share. Domestic players hold about 20% of overall market share vs CLEO’s only 4% share in terms of sales value (source: Numerator). (2) Selling price increase – CLEO has raised ASP by +6% YTD following the rise in packaging costs. (3) Normalizing direct promotion costs – we believe that CLEO may start lowering its direct promotion-to-sales ratio vs last year (where the company spent relatively more to counter the new entrant Wings Group [unlisted]). (4) Increasing R-PET (recycle packaging) usage should reduce raw material expenses as it costs 50% less vs imported packaging materials. (5) We expect the company’s planned increase of distribution points by +26% y-y to lower opex, due to proximity advantages; notably, logistics cost is the second-largest component next to packaging. Hence, we think higher imported raw material packaging costs can be mitigated to an extent; we believe CLEO’s margin performance should exceed market expectations.

Maintain Buy recommendation

We lower our FY26/27F earnings by 8%/2% due to higher packaging cost pressure. We maintain Buy rating with a lower TP of IDR620 (vs IDR680 previously), based on an unchanged target P/E of 32.8x FY26F. For CLEO, we maintain our target P/E premium over FMCG peers due to its sizable upside potential for market share, given its low base with a 4% market share currently, while the first/second largest players hold an estimated 30%/8% share (according to Numerator). CLEO’s competitive advantage through 32 factories (the most widespread factories in the FMCG industry) with >9K selling agents should help it outpace peers in terms of product availability, and in turn accelerate its capability to gain market share. The stock currently trades at 20x FY26F P/E. A downside risk is the stock’s low daily turnover.

Year-end 31 Dec	FY25		FY26F		FY27F		FY28F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
Revenue (bn)	2,826	3,347	3,444	3,824	4,009	0	4,625
Reported net profit (bn)	382	497	455	576	562	0	692
Normalised net profit (bn)	382	497	455	576	562	0	692
FD normalised EPS	15.91	20.71	18.98	24.01	23.40		28.82
FD norm. EPS growth (%)	-59.0	19.6	19.3	15.9	23.3		23.1
FD normalised P/E (x)	23.9	–	20.0	–	16.2	–	13.2
EV/EBITDA (x)	11.9	–	10.0	–	8.2	–	6.9
Price/book (x)	4.1	–	3.5	–	2.9	–	2.5
Dividend yield (%)	0.8	–	1.0	–	2.2	–	2.7
ROE (%)	18.5	20.7	18.7	20.2	19.6		20.7
Net debt/equity (%)	17.5	5.6	8.1	net cash	net cash		net cash

Source: Company data, Verdhana estimates

Key data on Sariguna Primatirta

Income statement (IDRbn)
Year-end 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
Revenue	2,697	2,826	3,444	4,009	4,625
Cost of goods sold	-1,125	-1,245	-1,567	-1,779	-2,004
Gross profit	1,571	1,580	1,878	2,229	2,620
SG&A	-912	-1,033	-1,248	-1,466	-1,691
Employee share expense	0	0	0	0	0
Operating profit	660	547	629	763	929
EBITDA	868	806	940	1,109	1,308
Depreciation	-208	-259	-310	-346	-379
Amortisation	0	0	0	0	0
EBIT	660	547	629	763	929
Net interest expense	-31	-27	-15	-11	-8
Associates & JCEs	0	0	0	0	0
Other income	-24	-23	-22	-24	-26
Earnings before tax	605	496	592	728	895
Income tax	-131	-107	-128	-158	-194
Net profit after tax	474	390	464	570	700
Minority interests	-9	-8	-8	-8	-9
Other items	0	0	0	0	0
Preferred dividends	0	0	0	0	0
Normalised NPAT	465	382	455	562	692
Extraordinary items	0	0	0	0	0
Reported NPAT	465	382	455	562	692
Dividends	-93	-76	-91	-197	-242
Transfer to reserves	372	305	364	365	450
Valuations and ratios
Reported P/E (x)	9.8	23.9	20.0	16.2	13.2
Normalised P/E (x)	9.8	23.9	20.0	16.2	13.2
FD normalised P/E (x)	9.8	23.9	20.0	16.2	13.2
Dividend yield (%)	2.0	0.8	1.0	2.2	2.7
Price/cashflow (x)	8.0	16.4	12.9	11.2	9.1
Price/book (x)	2.4	4.1	3.5	2.9	2.5
EV/EBITDA (x)	11.0	11.9	10.0	8.2	6.9
EV/EBIT (x)	14.5	17.5	14.9	11.9	9.7
Gross margin (%)	58.3	55.9	54.5	55.6	56.7
EBITDA margin (%)	32.2	28.5	27.3	27.7	28.3
EBIT margin (%)	24.5	19.4	18.3	19.0	20.1
Net margin (%)	17.2	13.5	13.2	14.0	15.0
Effective tax rate (%)	21.7	21.5	21.7	21.7	21.7
Dividend payout (%)	20.0	20.0	20.0	35.0	35.0
ROE (%)	27.8	18.5	18.7	19.6	20.7
ROA (pretax %)	28.2	19.5	20.4	23.1	25.8
Growth (%)
Revenue	29.0	4.8	21.9	16.4	15.4
EBITDA	39.1	-7.1	16.5	18.0	17.9
Normalised EPS	43.6	-59.0	19.3	23.3	23.1
Normalised FDEPS	43.6	-59.0	19.3	23.3	23.1
Source: Company data, Verdhana estimates

Cashflow statement (IDRbn)
Year-end 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
EBITDA	868	806	940	1,109	1,308
Change in working capital	-103	-84	-58	-97	-74
Other operating cashflow	-195	-165	-174	-202	-237
Cashflow from operations	571	558	708	811	997
Capital expenditure	-612	-591	-434	-420
Free cashflow	-41	-33	274	391	997
Reduction in investments	0	0	0	0	0
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	-39	27	-15	-16	-675
CF after investing acts	-81	-5	259	375	322
Cash dividends	61	60	76	91	197
Equity issue	0	33	0	0	0
Debt issue	-71	-26	-122	-81	-54
Convertible debt issue	0	0	0	0	0
Others	-86	-77	-153	-182	-393
CF from financial acts	-96	-10	-198	-172	-251
Net cashflow	-177	-16	61	203	71
Beginning cash	225	48	32	93	296
Ending cash	48	32	93	296	367
Ending net debt	405	395	212	-72	-197
Balance sheet (IDRbn)
As at 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
Cash & equivalents	48	32	93	296	367
Marketable securities	0	0	0	0	0
Accounts receivable	96	121	100	181	171
Inventories	275	305	384	442	529
Other current assets	38	51	53	56	58
Total current assets	457	509	629	975	1,125
LT investments	0	0	0	0	0
Fixed assets	2,032	2,363	2,486	2,561	2,839
Goodwill	0	0	0	0	0
Other intangible assets	0	0	0	0	0
Other LT assets	174	147	162	178	196
Total assets	2,663	3,019	3,277	3,713	4,160
Short-term debt	201	164	131	105	84
Accounts payable	97	115	112	153	153
Other current liabilities	82	47	52	57	63
Total current liabilities	380	326	295	314	299
Long-term debt	252	263	174	119	86
Convertible debt	0	0	0	0	0
Other LT liabilities	102	117	117	117	117
Total liabilities	734	707	586	551	503
Minority interest	55	63	63	63	63
Preferred stock	0	0	0	0	0
Common stock	507	540	540	540	540
Retained earnings	1,386	1,707	2,086	2,557	3,052
Proposed dividends	0	0	0	0	0
Other equity and reserves	-19	2	2	2	2
Total shareholders' equity	1,874	2,249	2,628	3,099	3,594
Total equity & liabilities	2,663	3,019	3,277	3,713	4,160
Liquidity (x)
Current ratio	1.20	1.56	2.13	3.10	3.76
Interest cover	21.5	20.1	41.3	68.1	109.3
Leverage
Net debt/EBITDA (x)	0.47	0.49	0.23	net cash	net cash
Net debt/equity (%)	21.6	17.5	8.1	net cash	net cash
Per share
Reported EPS (IDR)	38.76	15.91	18.98	23.40	28.82
Norm EPS (IDR)	38.76	15.91	18.98	23.40	28.82
FD norm EPS (IDR)	38.76	15.91	18.98	23.40	28.82
BVPS (IDR)	156.20	93.71	109.50	129.11	149.74
DPS (IDR)	7.75	3.18	3.80	8.19	10.09
Activity (days)
Days receivable	11.1	14.0	11.7	12.8	13.9
Days inventory	79.7	85.1	80.2	84.7	88.7
Days payable	33.7	31.1	26.5	27.1	27.9
Cash cycle	57.0	68.0	65.4	70.3	74.7
Source: Company data, Verdhana estimates

Company profilePT Sariguna Primatirta Tbk (CLEO), founded in 2003, is the leading packaged pure water in Indonesia. The brand produces high-quality pure water products with high-technology packaging, with BPA-free plastics and 100% recycled plastics. The company’s main products are as follows: Bottle (53%), Non-Bottle (45%), and Others (2%).

Valuation MethodologyWe value CLEO using target P/E of 32.8x FY26F (+0.7SD of its 5-year-mean), giving us TP of IDR620. The benchmark is JCI index.

Risks that may impede the achievement of the target priceDownside risk would be its low stock daily turnover issue.

ESGCLEO is committed to enhancing its ESG practices. To achieve this, CLEO has implemented eco-friendly alternative energy solutions like installing solar power plants (PLTS) of 4.2 MWp capacity across factories. The Company also reported an increase in efficiency of processing raw water into products by 4% from the previous year, as well as planted 5,000 mangrove tree seedlings.

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.

RESTRICTIONS ON DISTRIBUTION

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Rating Table

Rating Remains	Buy
Target price Reduced from IDR 680	IDR 620
Closing price 12 June 2026	IDR 380
Implied upside	+63.2%
Market Cap (USD mn)	510.5
ADT (USD mn)	0.1

Relative performance chart

Source: LSEG, Verdhana

M cap (USDmn)	510.5
Free float (%)	21.7
3-mth ADT (USDmn)	0.1

(%)	1M	3M	12M
Absolute (IDR)	-5.0	-6.4	-45.3
Absolute (USD)	-7.0	-11.5	-50.3
Rel to Jakarta Stock Exchange Composite Index	7.4	12.0	-28.7

Research Analysts

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)

Jody Wijaya (jody.wijaya@verdhana.id)

Nayla Yasmin (nayla.yasmin@verdhana.id)

Tags: FOOD AND BEVERAGE, Sariguna Primatirta, CLEO, CLEO JK, CLEO IJ, Sandy Ham, Samuel Christian, Jody Wijaya, Nayla Yasmin

Sariguna Primatirta (CLEO IJ) (Buy) - Strong earnings growth momentum

Strong earnings growth momentum

Key data on Sariguna Primatirta

Fig. 1: Indonesia's urbanization trend

Fig. 2: CLEO – Sales growth trend

Fig. 3: CLEO – NPAT margin trend

Fig. 4: CLEO – NPAT growth trend

Fig. 5: CLEO – ROE trend

Fig. 6: CLEO – Ownership structure

Fig. 7: CLEO – Forward P/E band

Rating Table

Relative performance chart

Research Analysts

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Indonesia FMCG - Lucrative risk or reward

Indofood CBP Sukses Makmur ICBP IJ -Buy- Solid growth engine

Sariguna Primatirta (CLEO IJ) (Buy) - Strong earnings growth momentum

Fig. 1: Indonesia's urbanization trend

Fig. 2: CLEO – Sales growth trend

Fig. 3: CLEO – NPAT margin trend

Fig. 4: CLEO – NPAT growth trend

Fig. 5: CLEO – ROE trend

Fig. 6: CLEO – Ownership structure

Fig. 7: CLEO – Forward P/E band

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