Mayora Indah (MYOR IJ)

Expect A Double-digit FY25F Core Profit Growth Despite 1Q25 Margin Challenges; Reiterate Buy

 

  • MYOR is optimistic about booking double-digit FY25 rev. growth and net profit yoy, supported by volume growth and lower input costs.
  • We raised our FY25-26F est. by 3.8%-2.3%, driven by higher FY25F ASP growth amid optimized A&P spending, leading to stronger OPM.
  • Amid higher gross margin base in 1Q24, we believe investors should look for growth beyond 1Q25; reiterate Buy rating with TP of Rp3,050.

 

Optimistic outlook for FY25 with double-digit revenue growth

In our recent meeting, MYOR cited Nielsen data indicating that FY24 FMCG volume remained flat, while value declined yoy. Despite this, MYOR gained ~100bps of market share in the Biscuit and Wafer category (exh. 3). The company continues to expand its market share by winning competitor shares and leveraging successful new product development. The management remains optimistic about 1Q25 and FY25’s performance, noting that Jan-Feb25 sales growth is in line with the FY25 guidance of double-digit growth. However, raw material costs will be a critical inflection point for profitability. As a result, the company expects its FY25 gross margin to range between 23%-25%.

 

FY25/26 core profit expected to grow by 13.5%/12.5% yoy

Following the release of the FY24 results, we have adjusted our FY25-26F gross margin expectations to reflect higher input cost assumptions, particularly for CPO and cocoa. Meanwhile, as MYOR has delivered A&P spending optimization (exh. 4), we estimate lower FY25/26F A&P-to-sales ratio of 7.1%/ 7.4%, down from 8% prev. However, higher gearing – primarily to finance raw material supply – will lead to increased financing costs. Considering these factors, we revise our FY25/26F core profit forecasts upward by 3.8% and 2.3%, respectively. Therefore, we estimate MYOR’s FY25/26F core profit to grow by 13.5%/ 12.5% yoy. 

 

Attractive earnings growth beyond 1Q25; Reiterate Buy rating

While we anticipate strong 1Q25 topline growth, 1Q25 core profit growth may be more challenging since MYOR recorded a high 1Q24 gross margin of 27.8% (4Q24: 20.9%, FY24: 23%). Therefore, we believe investors should look beyond 1Q25, focusing instead on the expected core profit growth in 2Q25 and beyond, driven by revenue growth and potentially more stable input costs.  We reiterate our Buy rating on attractive FY25 growth outlook with an unchanged TP of Rp3,050, implying FY25F PE of 20.5x.

 

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