Retail and Consumer Sector Insights

Retailers Boost Promotions as FMCG Prices Rise Ahead of Eid Festive

 

  • Retailers have offered healthy promotions Ytd, while we observed some FMCG price increases ahead of the Eid Festive season.
  • Amid reports of soft sales and demand in Feb Ytd, we believe the affordable FMCG segment should remain lucrative.
  • We maintain OW ratings in the Consumer and Retail sectors. We prefer MAPI and KLBF as our top picks, as both offer attractive valuations.

 

Channel Check: Healthy promotions Ytd, with an expected increase in promotions leading up to the fasting/Eid season

Based on our channel checks, we observed continued promotions in Jan25 by MAPI and MAPA as an extension of 4Q24 promotions, with deeper discounts toward the end of Dec24 due to the long holiday. In Feb25, discounts have started to diminish (Exhibit 3). For ACES, YTD February promotions are still focused on the rebranding of AZKO following the Chinese New Year (CNY) promotions in Jan25. We observed decent foot traffic at AZKO, with more than five customers at the cashier on weekends.

 

FMCG price tracker and channel check: Rising FMCG prices and competition from imported products

Within the FMCG space, we note that out of the 15 products that are included in our price tracking, 8 have maintained their prices over the past 8 months, while we observed significant price increases for Indomilk dairy, coffee (Torabika Cappuccino), biscuits/chocolate (Roma Malkist/Beng Beng), Tolak Angin, and dishwashing liquid, ranging from 6% to 18%. We visited Hapimart, a hypermarket operated by Chinese retailers in Jakarta, and found many imported FMCG products from China and Malaysia. Although data on the distribution coverage of these products is limited (Hapimart has only 4 outlets in Jakarta/Greater Jakarta), we believe this may introduce additional competition for local FMCG brands.

 

Expect continued solid revenue growth for our consumer and retailer names

Amid concerns about soft demand during the Eid season, we believe our consumer and retailer names will continue to deliver solid revenue growth. However, competition is expected to remain intense, and volatility in commodity prices may pose challenges to the margins of our consumer names. For retailers, we believe the ability to offer a wide range of product prices and greater efficiency will support FY25 performance.

 

Fund flows and stock preference: Reiterate MAPI and KLBF as our Buy rating

Within the retail sector, our data from 2023 to Feb25 YTD shows that MAPI continues to report a net foreign outflow, while other retailers remain in net foreign inflow (Exhibit 17). In terms of domestic funds, MAPI's overweight position (0.18% vs. others at 0.22%–0.40%) is also the lowest among the retailers under our coverage. The MoU signed between the government and Apple will facilitate the launch of the iPhone 16. Combined with the Eid festive season, we believe this may support MAPI’s share price in the near term.

 

Within the consumer sector, we observed significant foreign inflows into ICBP and INDF, while KLBF, MYOR, and UNVR reported net foreign outflows from 2023 to Feb25 YTD. Given KLBF's ample liquidity, we believe the downside risk from net foreign outflows is limited. We reiterate our Buy rating for KLBF, supported by its attractive valuation and in-line FY24 results, with fewer overhang concerns. Our pecking order in the retail sector is MAPI > MAPA > MIDI > ACES, while in the consumer sector, we favor ICBP > INDF > KLBF > SIDO > MYOR.

 

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