Company Update  /  Consumer Staples /  INDF IJ  /   Click here for full PDF version 
 Author(s):  Lukito Supriadi  ;Andrianto Saputra 

• INDF 's 1Q24 core profit of Rp3.2tr (+10.3% yoy) was above consensus at 35% but in-line with our estimate at 28% vs. 5yr average of 28%.
• All segments delivered better margins leading to INDF 's improved EBIT margin of 20.8% (+457bps yoy).
• Maintain BUY rating with unchanged TP of Rp10,400 based on SOTP valuation methodology.

1Q24 results: core profit beat from margin improvements
INDF 's headline 1Q24 net profit of Rp2.5tr (-36.4% yoy) dragged by forex loss of -Rp1.4tr (vs. 1Q23's forex gain of Rp2.1). Stripping off the FX impact, INDF posted 1Q24 core profit of Rp3.2tr (+10.3% yoy), and this was above consensus estimate at 35% and was in-line with our estimate at 28% vs. 5yr average of 28%.
CBP segment was the main driver in INDF 's outperformance
In terms of segments, CBP continued to be the main engine of EBIT growth of 13.5% yoy vs non-CBP segments' EBIT growth of -7.2% yoy. Margin expansion was evident in the CBP segment as wheat prices trended down in FY23 with a total of -16% to -18% drop. Notably, other non-CBP segments also delivered EBIT margin improvement of 100bps on a blended basis, with distribution's margin also expanded at +265bps yoy to 12.0%.
Retail flour's fortification premix supply tightness shall not impact ICBP
There was recent news reporting the supply tightness in fortification premix for retail wheat flour products following the implementation of Permendag 36/2023. Do note that retail wheat flour products have to be supplemented by fortification premix (which consists of vitamins and minerals) to adhere to SNI (Standar Nasional Indonesia). Subsequently, ICBP has previously issued a public response (linkhere) reiterating that wheat supply (B2B, not retail) for its instant noodles remains under normal condition. Additionally, we note that the government has responded positively by proposing to include fortification premix in the exclusion list for Permendag 36/2023.
Maintain Buy rating with unchanged TP of Rp10,400
In sum, we maintain our Buy rating on INDF with unchanged TP of Rp10,400, based on SOTP valuation. INDF 's FY24F P/E of 4.8x represents an attractive valuation proposition, with decent dividend yield expectation of 7.4% in FY24F. Key risk is softer CBP performance.


Sumber : IPS