Indofood Sukses Makmur (INDF IJ Rp 6,425; BUY; TP Rp 8,000) Still a sound value proposition; expect FY24F growth to be driven by ICBP and Distribution

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MFIN	4,600	920	25.00%
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Indofood Sukses Makmur (INDF IJ)

Still a sound value proposition; expect FY24F growth to be driven by ICBP and Distribution

We expect ICBP and the Distribution division to drive FY24F performance, supporting estimated top line growth of 5.7% yoy.
With the expectation of stable CPO and wheat prices, we expect robust margins to be maintained in FY24F.
We forecast FY24-25F core profit growth of 3.9% yoy and 7.2% yoy; maintain Buy rating with maintained TP at Rp8,000.

FY24F top line estimated to grow by +5.7% yoy

We forecast FY24F top line growth of 5.7% yoy, mainly driven by ICBP (+6.4% yoy) and the distribution business (+9.3% yoy). We expect Bogasari’s revenue to grow by +5.1% yoy in FY24F, supported by 3% volume growth and 1.6% ASP adjustments given expectations of continued soft wheat prices in FY24 (based on the Bloomberg consensus). For the Agribusiness division, the expectation of lower CPO prices of MYR3,650/ton (based on the Bloomberg consensus vs. MYR3,852/ton in FY23) and 4% yoy CPO sales volume lead to our projected 1.5% yoy revenues contraction.

Expect robust margins to be sustained in FY24F

At the operating level, we expect ICBP to maintain its EBIT margin at 21.9%, mostly driven by volume growth (+4.4% yoy). We expect distribution’s EBIT margin to be maintained at a healthy 6.5% in FY24F. For Bogasari, we expect lower wheat prices (US$600/bushel – Bloomberg) and volume growth to maintain the FY24F EBIT margin at 7.4%, still within the company’s guidance of 6-8%. With the outlook for soft CPO prices, we estimate lower EBIT margins of 12.6% for the plantations business. Against this backdrop, we forecast FY24F net profit growth of 21% yoy with the absence of impairments of associates under ICBP. For core profit, we estimate 3.9% yoy growth to Rp10tr.

A value choice with commodity exposure, maintain Buy rating

INDF remains a value proxy for ICBP as a consumer company with exposure to the commodity business (Agribusiness and Bogasari). INDF currently trades at FY24F PE of 5.7x (54% disc to ICBP’s 12.3x). We maintain our Buy rating with TP of Rp8,000, implying FY24F PE of 7x (50% disc. to ICBP’s target PE of 14.2x). Key risks are soft commodity prices and Rupiah depreciation.

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