Sector Update / Consumer Staples / Click here for full PDF version
Author(s): Lukito Supriadi ;Andrianto Saputra
- 1Q24 staples aggregate sales growth posted 2.6% yoy (+14% qoq) with domestic sales registering growth of 2.2% yoy (+22% qoq).
- Aggregate FY24F cons. EPS estimates have declined by -7.1% yoy with /UNVR at-26/-20%, reflecting generally softer expectations.
- Expect a favorable base effect for 2Q24, but we await further tangible signs of recovery and maintain our Neutral call on Staples for now.
1Q24: encouraging qoq recovery driven by election spending
Aggregate consumer staples domestic sales growth remained optically soft at 2.2% yoy, but actually recovered +22.1% qoq (vs. past 5yr average 1Q's 9.8% qoq) driven by social aid disbursement and earlier Lebaran seasonality. The shift in Lebaran seasonality has translated into stronger first quarter sales in recent years, but we note that 1Q24's +22.1% qoq recovery is still notably stronger than 1Q23's +12.6% qoq growth - the difference of which may be due to election spending spill over.
Recovery sustainability is unclear but 2Q23 base effect is favourable
Market remains uncertain on whether the election spending spill over's multiplier effect would be sufficient to drive a sustained recovery beyond 1Q24, especially given the backdrop of Rupiah depreciation against US$ (-5.1% YTD), which was discussed in our recent report (link). Nonetheless, it is worth highlighting that 2Q23 represents a favourable base effect for 2Q24, as 2Q23's aggregate revenue growth declined -16% qoq (vs. 5year average 2Q's -7% qoq sales decline). Additionally, indicators such broiler price has seen 4M24 averaging +15.5% yoy of Rp20.3/kg (vs. 4M23's avg. of Rp17.6k/kg) which may reflect slightly improved buying power in general. Do note that 4M24's broiler price strength was demand-driven as culling program from government was absent since Nov23.
Consensus expectations on staples are relatively low
Separately, we tracked FY24F consensus aggregate earnings have declined -7.1% yoy with meaningful cuts for /UNVR at -26/20% yoy(Fig. 5), reflecting the generally softer expectations for the sector. Similarly, FY24F consensus revenue forecast has also declined -9.5% yoy (Fig. 4).This contributes to 1Q24 core earnings beat across all consumer names within our coverage, with our top pick 's 1Q24 earnings notably recording 38% of FY24F consensus earnings(vs. 5yr average of 22%, Fig 14). On a separate note, the earnings beat are attributed mainly due to EBIT margin improvement of +502bps yoy as 1Q24 top-line attainments are in-line with expectations.
Maintain sector Neutral call as we await further tangible signs of recovery
While we note that selective names such as /MYOR has seen consensus earnings upgrades with +17.6/6.2% YTD, we await further signs of tangible recovery before turning more positive. Institutional ownership trend remains similar to the previous month (Fig 16 - 25), with notable local institutional ownership increase in . Maintain our sector Neutral call for now. Our pecking order for staples is as follow: > > > > > .
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