Sector Update / Consumer Staples / Click here for full PDF version
Author(s): Andrianto Saputra ; Nicholas Bryan
- We expect purchasing power to gradually improve in 4Q25F onwards amid government spending.
- Benign soft commodity prices outlook to drive staples' FY26F earnings; shall be the prime beneficiary.
- Upgrade to Overweight due to tangible purchasing power improvement and benign soft commodity price.
Fiscal spending to drive consumption
We expect purchasing power to gradually improve in 4Q25F onwards on the back of (i) government additional cash assistance of Rp900k in Oct-Dec25 for 35.4mn recipients, equal to Rp31.9tr, (ii) free meal program in FY26F which has the potential to create 1.5mn new jobs. Moreover, we view the purchasing power recovery will be more sustainable as job creation structurally strengthens household income rather than providing only temporary support.
Sign of purchasing power improvement
Within our coverage, we observed that 3Q25 domestic staples sales grew at 7.4% yoy (vs. 5yr avg of 3.3% yoy), indicating a recovery in basic-goods demand. We also note that staples sales often act as a leading indicator for 2W wholesales (proxy for grassroots purchasing power) with Sep/Oct25 2W wholesales recovered to +7.3/+8.4% yoy (vs. 7M25's -1.7% yoy). Our conversation with staples company indicated that Oct-Nov25 sales continued the positive trend since 3Q25. In sum, we see evidence of purchasing power improvement in Oct25 onwards, following the initial signs observed in 3Q25 domestic staples sales recovery.
Benign soft commodity prices outlook to drive GPM improvement for staples, especially for and
Robusta coffee/Cocoa/Sugar/CPO/powder milk/Brent oil prices have declined by -18.2/-57.2/-21.4/-16.7/-12.6/-15.5% YTD and this shall benefit /ICBP/UNVR/KLBF as combined these commodities contributed 54/32/40/28% of its COGS , respectively. Given a benign soft commodity outlook in FY26F, we expect GPM to improve and forecast /ICBP/UNVR/KLBF/SIDO FY26F earnings to grow by +23.1/+10.2/-1.1/+7.8/+6.2% yoy, respectively. To note, 's flat bottom-line yoy growth was due to the divestment of ice cream business in 4Q25F which accounted for c.10% total sales.
Upgrade to OW rating
We note that Indonesia's staples valuation has de-rated to 12.5x fwd. 12M PE (-1.8 s.d. from its 5yr mean) amid softer sales growth (FY19-24/11-18 CAGR : 3.5/9.7%), suggesting a limited downside. As we expect the purchasing power to gradually improve in FY26F amid fiscal spending, we view the sector has a potential for rerating. Overall, we upgrade our sector call to Overweight rating due to a tangible purchasing power improvement and benign soft commodity prices outlook which shall be a boon to bottom-line. Our pecking order are: >KLBF>>UNVR>. is our top pick on the back of robust earnings growth of +23.1% yoy (vs. aggregate's 7.2% yoy).
Sumber : IPS