Sido Muncul (SIDO IJ)

Raising FY25-26F Forecast; Reiterate Buy Rating as Competitive Edge Intact

• SIDO is optimistic about achieving a minimum of 10% rev. and NP growth in FY25, driven by Herbal and strong growth in the F&B segment.
• Assuming higher gross margin projections from FY25/26F, we revise our FY25/26F net profit estimates upward by 11%/12%.
• Compared to peers, SIDO has minimal USD-linked costs, 7-8% div. yield and high ROE. We reiterate our Buy rating with unchanged TP of Rp640.

2025: Optimistic outlook, driven by stronger growth in F&B segment

SIDO is optimistic about achieving a minimum of 10% yoy growth in revenue and net profit in 2025, driven by volume growth and selective asp adjustment. According to Euromonitor report, the cold, cough and allergy category (part of herbal/traditional products segment) had a market size of Rp6.5tr in 2024. Euromonitor projects this category to experience the strongest growth within 2024-29, with CAGR of 7.5%, which remains in line with our projected volume growth of Tolak Angin group, the market leader in the liquid ‘RTC masuk angin’ category. In the F&B segment, the company expects energy drink sales—both in export and domestic markets—to remain a key growth driver, supporting double-digit revenue growth in the coming years.

Revised FY25/26F NP estimates by 11%/12% on higher gross margin

Following the release of FY24 results, we have raised our FY25/26F net profit estimates by 11.4%/ 11.6%, primarily driven by higher gross margin projections. With most raw materials sourced locally and key F&B input prices (Taurine, Citric Acid and Aspartame) remaining low, we expect high margins to be sustained. We project the F&B segment to remain the primary volume driver, while the Herbal is projected to maintain stable single-digit growth. With maintained A&P/revenue ratio, we estimate FY25/26F net profit growth of 7.3%/8.9% yoy, respectively.

High ROE, minimum USD-linked cost and 7-8% div.yield: Reiterate Buy rating

Over the medium and long term, we believe revenue growth will be driven by the F&B segment, particularly its export and commodity-related business volume. Meanwhile, we expect the Herbal segment to continue growing at a single-digit rate given its significant market share, in line with overall market growth. Therefore, we adjust our FY28-32 forecast to reflect lower margins (with higher contribution of F&B) and maintain our target price (TP) of Rp640 (implied FY25F PE of 15.3x) based on DCF valuation. Amidst market volatility, we believe SIDO—with its minimal USD-linked input costs, high ROE, and an attractive 7-8% dividend yield—could serve as a defensive play, especially as current valuation of 12.9x is attractive. Key risk is quarterly revenue volatility, which is heavily influenced by weather conditions and consumer purchasing power.

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