Buy 22% potential upside

13 July 2026

Price Rp 380

Target price Rp 460

Investment Considerations

Herbal and F&B segments contract Amid Inventory Normalization

• PT Industri Jamu dan Farmasi Sido Muncul Tbk (SIDO) recorded an 18.8% YoY decline in total sales to IDR640.5 billion in 1Q26, primarily reflecting planned channel inventory normalization, seasonal distribution disruptions during the extended Lebaran period, and weaker demand across several key product categories.
• Export sales continued to gain importance, contributing 14.0% of total revenue in 1Q26, compared with 12.1% in 1Q25. Key export markets included Malaysia, contributing around 4% of total sales, followed by Nigeria and the Philippines at around 1%–2% each.
• The Food & Beverage (F&B) segment recorded a 15.0% YoY and 19.8% QoQ decline in revenue to IDR342 billion, reflecting normalization in energy drink inventory levels and weaker demand from mining-related workers amid delayed activity recovery in the coal and nickel sectors. This was partially offset by initial traction from newly launched products, including C+ Collagen and several ready-to-drink variants.
• F&B gross margin moderated to 43% from 46%, reflecting lower operating leverage following normalized energy drink volumes and higher input costs, particularly sugar and taurine.
• The Herbal & Supplements segment recorded the largest contraction, with sales declining 26% YoY to IDR268 billion. The decline mainly reflected normalization in Tolak Angin sell-in following exceptionally high channel stocking levels in the prior-year period, together with softer global essential oil prices.
• Nevertheless, SIDO maintained its strong market leadership, with Tolak Angin holding a 72% market share in 1Q26. Export-oriented products such as Tolak Angin Care also continued to record positive growth.
• Despite weaker sales volumes, the Herbal & Supplements segment’s gross margin improved to 62% from 61% in 1Q25, supported by significantly lower raw material costs, particularly patchouli oil and ginger, as well as lower production activity during the inventory normalization period.
• By contrast, the Pharmaceuticals segment delivered strong growth, with revenue increasing 26% YoY to IDR29 billion. Growth was supported by resilient OTC demand, broader institutional reach, improved e-catalog execution, and stronger distribution channel coverage.
• Pharmaceutical gross margin expanded significantly to 40% from 26% in 1Q25, supported by stronger OTC sales, improved pricing, and a more favorable institutional sales mix.
• Looking ahead, management revised its FY2026 guidance to broadly flat sales and NPAT growth, compared with its previous target of 5%–8% growth. The revision reflects a more cautious outlook amid ongoing channel normalization and softer demand conditions.
• Nevertheless, management expects channel health and distribution quality to improve gradually following the inventory normalization process, while new product launches, continued export expansion, and a potential recovery in industrial-related demand could provide support in the coming quarters.

Q1 2026 Result: Lower Volumes Pressure Margins

• SIDO’s operating profit declined 35% YoY to IDR186 billion in 1Q26, while operating profit margin contracted to 29% from 36% in 1Q25. The decline mainly reflected weaker operating leverage as sales volumes normalized.
• Labor expenses increased 28.6% YoY following annual salary adjustments and higher employee incentives related to the company’s strong FY2025 performance. Nevertheless, advertising and promotional spending remained disciplined, declining 2.2% YoY, with expenditure strategically timed across the year.
• Net profit declined 37% YoY to IDR147 billion, broadly in line with weaker operating performance, while net profit margin decreased to 23% from 30% in 1Q25.
• Lower finance income, down 56% YoY following capital allocation initiatives including share buybacks and dividend distributions, also contributed to earnings pressure. This was partially offset by improved foreign exchange performance.

Valuation: Maintain Buy, TP IDR 460

• We maintain our BUY recommendation on SIDO with a revised 12-month target price of IDR460 per share, implying 22% upside from the current share price.
• Our valuation is based on a forward P/E multiple of 11x, reflecting expectations for gradual margin improvement as channel inventory normalizes, together with seasonal demand recovery, continued export growth, and potential contributions from new product launches.