Indofood CBP Sukses Makmur (ICBP IJ)

Still a solid outlook post FY23 one-off impairment

• Strong FY23 EBIT performance supported by solid volume/top line and improved gross margins thanks to subdued input prices.
• We forecast FY24F core profit growth of +9.5% supported by solid revenue driven by 4-5% yoy volume growth and steady margins.
• Attractively valued at 12.3x FY24 PE, maintain Buy rating with a lower TP of Rp12,900 implying FY24F PE of 13.8x, still below -1SD of avg-5y PE.

FY23: Solid EBIT margin backed by robust revenue and subdued input prices

ICBP reported FY23 revenue growth of 4.8% yoy, mostly driven by higher ASP and volume growth. All divisions reported positive volume growth except for Dairy (-4% yoy) and Nutrition & Special Foods (-9% yoy). As raw material prices remain subdued, ICBP reported a high FY23 EBIT margin at 21.8% despite higher spending in A&P (3.5% to revenue vs 3.3% in FY22) and higher salary/employee compensation benefits (3.8% to FY23 revenue vs 3.2% in FY22). Currency depreciation in Nigeria (-34.8% Ytd and -67.0% yoy) led the company to impair its investment in its associate Dufil, resulting in a non-cash permanent impairment of Rp2.4tn. This weighed on the FY23 net profit. Nonetheless, excluding the impairment and forex gains, ICBP reported FY23 core profit of Rp9.3tr, +27% yoy, still inline with our forecast (97%) and the consensus (105%).

FY24F core profits estimated to grow by 9.5% yoy

ICBP guides for 5-8% yoy FY24 top line growth (driven by volume) with a higher range for EBIT margins of 19-21% (18-20% in previous years) amid the expectation of stable input prices. We expect ICBP to book FY24-25F revenue growth of 6.9% yoy and 8.6% yoy, respectively, supported by 4-5% yoy volume driven by Noodles (4-5% yoy), Snack (+4%) and Food Seasoning (8-11%). As we assume a stable outlook for input prices (Wheat at US$600/bush and CPO: MYR3,650/ton), we also expect ICBP to maintain its gross margin at around 37% (vs 2018-22 range of 32% - 37%) and opex/revenue at around 15%. Below the operating line, we expect core net profits growth of +9.5% yoy (robust FY24F net profit growth of +52% yoy absence of Rp2.3tn of impairments).

Maintain Buy rating with a slightly lower TP of Rp12,900

At the current share price, ICBP trades at FY24 PE of 12.3x (25% discount vs. peer of 16.4x) with the expectation of decent core profit growth of 9.5% yoy, amid its more resilient nature. Taking into account our new forecast, we maintain our Buy rating with a lower TP of Rp12,900 (from Rp13,000 prev.), implying FY24F PE of 13.8x, still below its -1SD avg-5y PE of 14.7x.

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