ICBP Aug2023

ICBP

Contact our analyst Eka

Buy, 25% upside
11th August 2023
Price Rp 11,400
Target price Rp 14,300

Sales experienced a quarterly decrease

In 2Q2023, ICBP's sales recorded a decline of -0.4% YoY or -19.9% QoQ, amounting to IDR 15.3 trillion. This decline was primarily due to stagnant sales volume, except for a decrease in the dairy segment. Domestic sales contributed IDR 25.1 trillion, with a growth of +6.2%. Meanwhile, Other Asia sustained a double-digit growth of 36.6% YoY, totaling IDR 786 billion. Export sales to the Middle East and Africa also exhibited growth, increasing by +1.5% YoY, reaching IDR 7.5 trillion in 2Q2023. For 1H2023, ICBP maintained a robust double-digit sales growth of +21.4% YoY, reaching IDR 34.5 trillion.
Noodle sales remained steady YoY, yet decreased by -19.3% QoQ to IDR 11.3 trillion. Despite this, the EBIT margin increased to 25.4%, up from last year's 16.6%. Snack Food sales sustained positive growth of +2.8% YoY, but experienced a decline of -16.3% QoQ to IDR 949 billion. The EBIT margin also increased to 7.6% from 4.9% last year. Beverage sales remained constant at IDR 389 billion, achieving a higher EBIT margin of 12.2% compared to 3.3% in 2Q2022.
Dairy sales encountered an -11% YoY drop, or -19.3% QoQ, amounting to IDR 2.17 trillion. However, the EBIT margin increased to 5.8% from 3.2% in 2Q2022 due to a decline in volumes. Food Seasoning sales decreased by -3.2% YoY, or -38% QoQ, totaling IDR 783 billion, with a decline in the margin to 13.2%.
Nutrition & special foods sales increased by +8.5% YoY to IDR 293 billion, accompanied by a higher EBIT margin of 6.3%.

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Maintaining impressive profit growth

Despite the flat YoY sales in 2Q2023, the cost of goods sold decreased by -10.2% YoY or -19.8% QoQ, attributed to a -21% YoY decrease in raw material costs. Consequently, ICBP's gross profit increased by +23% YoY, albeit declining -20% QoQ to IDR 5.57 trillion, with an improved YoY GPM of 36.3%.
Net profit decreased by -55% QoQ, but still showed an improvement compared to a loss of IDR 1.77 trillion in 2Q2022, thanks to a higher forex gain of IDR 113 billion in 2Q2023. This resulted in a lower profit before tax by -48% QoQ, but still representing a remarkable increase of 399% YoY to IDR 2.8 trillion. Notably, the NPM stands at 11.5%.
For 1H2023, ICBP achieved triple-digit profit growth of +196.7% to IDR 5.73 trillion, largely driven by a higher forex gain of IDR 1.9 trillion.
Looking ahead, we expect higher margins in 2H2023 due to increased demand and a downtrend in commodity prices.

Valuation: Maintain Buy rating with TP to 14,300

Our price target for ICBP is set at IDR 14,300, reflecting a potential upside of 25% and a 19X PE valuation within a year. We uphold our recommendation to BUY.

Previously

ICBP May2023