Contact our analyst Eka

23 January 2024

Price Rp 6.425

Maintain Buy with Target Price Rp 9.800

Investment Considerations

Quarterly margin improvement

INDF maintained a positive sales growth of +3.8% YoY in 9M2023, reaching IDR 83.88 trillion. This growth was primarily driven by stronger performances and improved margins from ICBP and the distribution business. In 3Q2023, INDF sales recorded a growth of +8.8% QoQ but slightly declined -0.8% YoY to IDR 27.8 trillion.
ICBP witnessed a sales growth of +1.6% YoY, to IDR 16.99 trillion. ICBP’s EBIT margin increased to 21.3% from 20.3% in 3Q2022, aligning with softer raw material prices (wheat and CPO prices).
Distribution revenue showed a double digit growth of +23.1% YoY, reaching IDR 1.7 trillion, but with a lower EBIT margin of 5.7%.The Bogasari and agribusiness segments faced declines compared to last year (YoY) but recorded growth compared to 2Q2023 (QoQ), due to softened commodity prices, particularly wheat and CPO.
Bogasari’s sales decreased by -11% YoY but improved +4.9% QoQ, to IDR 7.37 trillion, and its EBIT margin improved QoQ to 8.1% from 7.2% in 2Q2023. This decline was attributed to lower wheat prices and some adjustments in selling price.
Similarly, agribusiness sales declined by -1.2% YoY but improved +20.59% QoQ, to IDR 4.2 trillion, with the Agribusiness EBIT margin improving QoQ to 12.5%.
Looking ahead to 2024, we expect an improvement in the agribusiness margin as CPO prices rebounded in early 2024. We also maintain an optimistic outlook for ICBP as a beneficiary of lower raw material prices. We expect INDF’s top-line sales to reach IDR 123.3 trillion this year.

3Q2023: Higher forex loss

INDF’s net profit decreased -13.1% YoY or -11.6% QoQ to IDR 1.51 trillion, the decline was due to a higher forex loss of IDR 1.73 trillion in 3Q2023. This resulted in a lower net profit margin (NPM) of 5.5%. If we exclude forex, INDF profit still grew +6.2% YoY to IDR 3.25 trillion in 3Q2023.
For 9M2023, INDF still booked +52.4% net profit growth to IDR 7 trillion with a higher NPM of 8.4%. If we exclude forex, INDF profit decreased -14.3% YoY to IDR 6,68 trillion in 9M2023.
INDF gross profit reached IDR 8.87 trillion or +1.2% YoY as cost of sales declined -1.7% YoY. This resulted in a higher gross profit margin (GPM) of 31.9%.
Taking into account the positive impact on margins from softer commodity prices and the growth in demand, we anticipate INDF’s profit to reach IDR 10.6 trillion in 2024F.

Valuation: Maintain BUY with TP 9,800

Our target for INDF is IDR 9,800, representing a potential upside of 51%, based on an 9x PE valuation over the next year. We maintain our BUY recommendation.