Equity Research – Sector Update Friday, 08 December 2023

Overweight Consumer
(Maintained) Room for growth is still in store
• With the FMCG market having sound growth prospects, we estimate
FY24F growth of 7% yoy.
MYOR relative to JCI Index
• Some categories still showed promising growth in 3Q23, despite the
market’s overall volume contraction.
• We maintain our sector OW rating and expect ICBP (TP Rp13,000) and
MYOR (TP Rp3,500) to fare better under a soft recovery scenario.

FMCG market expected to grow 7% yoy in FY24F

We hosted a well-attended event with Mr. Yongky Susilo, a retail and
consumer strategist, to discuss the dynamics of consumer purchasing power
ahead of the elections. On the FY24 FMCG market growth outlook, despite
tepid 4% basic minimum wage hikes in 2024, Mr. Susilo estimated 7%
revenues growth, while several FMCG companies are optimistic of booking
double-digit growth in beverages and snacks as they aim to push new
products. In the grassroots segment, government support including the
ICBP relative to JCI Index provision of social assistance will be imperative in supporting purchasing
power amid continued downtrading.

3Q23: growth in some categories despite the market’s volume contraction

While Nielsen 3Q23 data showed volume contraction of -5% yoy,
improvements are expected approaching the year-end holidays. The
beauty/health products category and skincare products still reported growth
in 3Q23 as a proxy to improved mobility as daily activities normalized. In the
top 10 FMCG categories, mineral water and snacks reported positive volume
growth of 1% and 2% qoq. For the next 11-20 categories, skincare, sweet-
condensed milk (SCM), chocolate, candies and frozen food also grew
supported by more extensive distribution, practical serving sizes (for frozen
Source: Bloomberg food) and increased indulgence consumption.

Hyper-segmentation to tap market potential

BRI Danareksa Sekuritas Analysts Going into 2024, we see good growth prospects for FMCG companies which
have the ability to cater to certain market segments such as indulgence
Natalia Sutanto consumption, health products and convenience goods. To grow faster than
(62-21) 5091 4100 x. 3508 the market, FMCG companies need to focus on hyper-segmentation to tap
[email protected] market segments which have more promising growth prospects. For retailers,
they must attain a deeper understanding of consumer brand preferences to
increase sales.
Sabela Nur Amalina
(62-21) 5091 4100 x. 4202 Maintain OW rating: ICBP and MYOR as our top picks
[email protected]
Within our coverage, MYOR (Buy – TP Rp3,500) has support from a wide
product portfolio and extensive distribution network. For ICBP (Buy – TP
Rp13,000), its strong presence in noodles markets with potential growth in
snack and food seasoning products should sustain earnings growth going
forward. Downside risks to our recommendations are lower-than-expected
sales volume and higher input costs that would squeeze margins and
earnings.
Market
TP Cap. P/E (x) P/BV (x) ROE (%) Dividend EPS growth
Ticker Rec (Rp) (Rp Bn) 2023F 2024F 2023F 2024F 2024F Yield (%) 2023F 2024F
UNVR IJ Hold 3,200 136,200 25.2 24.2 33.9 33.7 139.6 3.9 0.7 4.2
ICBP IJ Buy 13,000 124,200 13.5 11.6 2.9 2.6 23.6 2.9 100.7 16.2
KLBF IJ Hold 1,600 78,280 29.2 28.4 3.6 3.3 12.2 1.7 (21.7) 2.9
INDF IJ Buy 8,000 56,630 6.3 5.6 0.9 0.8 15.6 3.6 42.0 11.3
MYOR IJ Buy 3,500 52,770 18.5 17.0 3.7 3.3 20.5 2.1 47.1 8.3
SIDO IJ Hold 500 16,500 18.6 17.4 4.6 4.5 26.3 5.0 (19.7) 6.9
bridanareksasekuritas.co.id
ROTI IJ Buy 1,700 7,150 19.0 15.3 See important
2.5 disclosure
2.5 at16.1
the back of5.3this(20.0)
report 24.51
Equity Research – Sector Update Friday, 08 December 2023

Exhibit 1. 3Q23 volume still down 5% yoy Exhibit 2. Several categories with >20% growth ahead
15

10

0
FY18 FY19 FY20 FY21 FY22 MAT 3Q23 vs
-5 Sept 23 YA
Vs Ya
-10

Value growth Vol unit growth

Price/unit change

Source: Nielsen Source: Hippindo

Exhibit 3. Beauty and decorative still grow

Source: Hippindo

Exhibit 4. Peers comparison

2024F MYOR ICBP ROTI INDF SIDO KLBF UNVR Sector
Growth (%)
Sales 10.8 7.9 13.1 5.9 5.4 5.8 3.3 6.3
EBITDA 12.0 7.5 16.4 6.1 6.6 4.8 3.2 6.3
Operating profit 12.3 8.3 21.9 6.5 6.8 4.5 4.2 6.9
Net profit 8.3 16.2 22.4 11.3 6.9 2.9 4.2 8.8
Core profit 13.0 4.6 22.4 2.0 6.9 4.1 4.2 5.4
Profitability (%)
Gross margin 26.9 36.4 54.1 31.3 53.8 38.7 49.8 39.7
EBITDA margin 15.2 23.7 18.3 20.0 31.2 13.8 19.4 19.6
Operating margin 12.4 21.9 14.2 16.9 34.4 11.4 17.6 17.5
Net margin 8.8 14.6 9.8 8.3 27.6 8.5 13.5 12.2
ROAA 12.6 8.8 10.4 5.4 23.1 9.4 31.9 16.1
ROAE 20.5 23.6 16.1 15.6 26.3 12.1 139.6 53.9
Leverage
Net Gearing (x) 0.0 0.3 nc 0.3 nc nc 0.1 -
Interest coverage (x) 13.7 8.6 12.5 6.1 1,719.4 36.4 70.7 86.1
Source: BRIDS Estimates

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Equity Research – Sector Update Friday, 08 December 2023

Exhibit 5. Investment thesis within our coverage

ICBP • We reaffirm our positive earnings outlook on ICBP (FY24F net profits/ core profits growth of
(BUY – TP +16%/+5% yoy), underpinned by 7.9% yoy top line growth with 4% volume growth, stable margins
Rp13,000) and our assumption of year-end 2024 rupiah at Rp15,600/USD.
• Noodles volume remained steady with 5.7% CAGR in 2012-22, mainly supported by the Pinehill
acquisition in 2020. To cater to downtrading practices, ICBP offers larger-sized instant noodles
under the brand Sarimi (Sarimi containing 2).
• ICBP sells diversified products and enjoys stable sales. The company has an attractive valuation
and trades at FY24F PE of 11.5x, or at a 37% discount to sector peers. Key risks include stalled
growth in Pinehill's market and rupiah depreciation.

MYOR • MYOR will benefit from more festive events - especially in 1H24 as it offers so-called indulgent
(Buy – TP products at bargain prices, targeting impulse spending by the working class. For 2H24, higher
Rp3,500) export sales should sustain top line growth.
• We expect MYOR to sustain its gross margins at 26.8-26.9% in FY23-24F, supported by a solid top
line (+11% yoy) and subdued commodity prices.
• We estimate FY24 core profits growth of 13% yoy to IDR3.18tn. Key risks include soft volume
growth and tepid growth in export markets. Maintain BUY with a TP of IDR3,500 implying FY24F
PE of 25.3x.

ROTI • We believe ROTI will generate higher FY24 earnings growth compared to its peers, coming off a
(Buy – TP low base in 2023, supported by ample production capacity, an extensive distribution network and
Rp1,700) a range of SKUs to tap demand from purchasing power recovery.
• We estimate the sales volume growth of ROTI to reach 8% yoy in FY24 to support top line growth
of +13.5% yoy and earnings growth of 24.5% yoy.
• Maintain BUY with a TP of Rp1,700, implying FY24F PE of 22.5x.

INDF • We expect INDF to book solid FY24 net profits/ core profits growth of 11.3%/ 2% yoy, supported
(Buy – TP by 5.9% top line growth and a slight improvement in margins.
Rp8,000) • We see INDF as a value proxy for ICBP (at a current 52% discount to ICBP’s PE).
• Maintain BUY on the stock with an unchanged TP of Rp8,000.

SIDO • For 2024, we estimate better volume growth of 4% to support FY24 top line growth of 5.4% yoy.
(Hold – TP Since most of the raw materials are locally sourced (80% of the total), we estimate steady gross
Rp500) margins at 53.8%.
• For 2024, we expect more conservative spending on A&P (8% to revenues vs 8.5% in 2023). This
will filter through to FY24 earnings growth of 6.9% yoy to Rp948bn.
• We maintain our HOLD recommendation with a TP of Rp500 (FY24F PE of 15.8x).

KLBF • We are turning more cautious on KLBF’s FY23-25F EPS growth as we note a threat to its branded
(Hold – TP prescription drugs from the persistent uptrend of hospital JKN patients in 9M23 (17% CAGR in
Rp1,600) 2014-22).
• Amid soft purchasing power and a growing trend toward higher lifestyle product spending, we
project sales of Consumer Health and Nutritional products to remain tepid at 4-5% yoy in FY24
and forecast continued low FY24F gross margins of 38.7%. Overall, we project 5.8% yoy revenues
growth.
• We expect KLBF to maintain its FY24F opex/revenues at 27.2% and as such, expect 2.9% yoy
earnings growth. Maintain HOLD with a TP of Rp1,600, implying FY24F PE of 26.8x (in-line with
the 5-year avg. PE of 26.6x).

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Equity Research – Sector Update Friday, 08 December 2023

UNVR • Within our FMCG coverage, we expect UNVR to benefit the least from the upcoming year-end
(Hold – TP holidays and election-related spending, as our channel check indicated potential an impact from
Rp3,200) recent negative campaigns on its products.
• We estimate soft 4Q23 sales and lower our FY23F top line estimate to Rp40.4tn (-2% yoy) with net
profit of Rp5.4tn (+0.7% yoy)
• With only 4% higher minimum wages in 2024, we see fewer catalysts for UNVR given the
expectation of soft purchasing power and continued downtrading. With FY24 earnings growth of
+4.2% yoy, we downgrade our DCF-based TP to Rp3,200 (WACC 8.4% and TG 3%) and maintain
our HOLD recommendation.

Source: BRIDS Estimates

Exhibit 6. PE Band - ICBP Exhibit 7. PE Band - MYOR

Source: Bloomberg, BRIDS estimates Source: Bloomberg, BRIDS estimates

Exhibit 8. PE Band - ROTI Exhibit 9. PE Band - INDF

Source: Bloomberg, BRIDS estimates Source: Bloomberg, BRIDS estimates

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Equity Research – Sector Update Friday, 08 December 2023

Exhibit 10. PE Band - SIDO Exhibit 11. PE Band - KLBF

Source: Bloomberg, BRIDS estimates Source: Bloomberg, BRIDS estimates

Exhibit 12. PE Band - UNVR Exhibit 13. YTD share price performance (as of 07 Dec-23)

Source: Bloomberg, BRIDS estimates Source: Bloomberg

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Equity Research – Sector Update Friday, 08 December 2023

BRI Danareksa Equity Research Team

Erindra Krisnawan, CFA Head of Equity Research, Strategy, Coal [email protected]
Natalia Sutanto Consumer, Cigarettes, Pharmaceuticals, Retail [email protected]
Niko Margaronis Telco, Tower, Technology, Media [email protected]
Hasan Barakwan Metal, Oil and Gas [email protected]
Victor Stefano Banks, Poultry, Property, Industrial Estate [email protected]
Ismail Fakhri Suweleh Healthcare [email protected]
Ni Putu Wilastita Muthia Sofi Research Associate [email protected]
Naura Reyhan Muchlis Research Associate [email protected]
Sabela Nur Amalina Research Associate [email protected]
Christian Immanuel Sitorus Research Associate [email protected]

BRI Danareksa Economic Research Team

Helmy Kristanto Chief Economist, Macro Strategy [email protected]
Dr. Telisa Aulia Falianty Senior Advisor [email protected]
Kefas Sidauruk Economist [email protected]

BRI Danareksa Institutional Equity Sales Team

Yofi Lasini Head of Institutional Sales and Dealing [email protected]
Novrita Endah Putrianti Institutional Sales Unit Head [email protected]
Ehrliech Suhartono Institutional Sales Associate [email protected]
Yunita Nababan Institutional Sales Associate [email protected]
Adeline Solaiman Institutional Sales Associate [email protected]
Andreas Kenny Institutional Sales Associate [email protected]
Christy Halim Institutional Sales Associate [email protected]
Jason Joseph Institutional Sales Associate [email protected]

BRI Danareksa Sales Traders

Mitcha Sondakh Head of Sales Trader [email protected]
Suryanti Salim Sales Trader [email protected]

INVESTMENT RATING
BUY Expected total return of 10% or more within a 12-month period
HOLD Expected total return between -10% and 10% within a 12-month period
SELL Expected total return of -10% or worse within a 12-month period

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