ICBP Dec2020

ICBP

Contact our analyst Eka

Buy, 26% upside
8th December 2020
Price Rp 9,950
Target price Rp 12,580

Mixed results

Despite the covid-19 outbreak, ICBP managed a positive sales growth of +3.4% to IDR 33.9 trillion in 9M2020. For 3Q2020, net sales grew +2% YoY to IDR 10.85 trillion, better compared to 1Q2020 (-10%) and 2Q2020 (-2%).
In 3Q2020, Noodles are still the largest contributor at 66.1%, with sales of IDR 7.4 trillion, followed by Diary at 17.5%, IDR 1.9 trillion, Snack Foods 6%, IDR 681 billion, Food Seasonings 5.9%, Nutrition & Special Foods 2.1% and Beverages 2.4%.
Beverages recorded operating losses in 3Q2020 of IDR -13 billion after experiencing operating income in 1Q2020.
But beverages EBIT margins improved from -13.8% in 3Q2019 to 12.6%. Dairy EBIT margin also improved from 7.5% in 2Q2020 to 10.8% in 3Q2020.
Noodles and Food Seasoning EBIT Margins decreased to 20.9% and 12.2% from 24.8% and 15.2% respectively in 2Q2020.
We expect better 4Q2020 sales as the economy gradually improves and as the revenue contribution from Pinehill increases because there will be a full quarter of Pinehill’s results consolidated in the 4Q2020.

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3Q2020: Lower QoQ

With flat revenue, gross profit was higher +6.7% YoY but decreased -3.6% QoQ to IDR 3.9 trillion in 3Q2020. This resulted in a lower GPM of 36.8% in 3Q2020 compared to 2Q2020’s 37.6%.
Operating income also decreased by -7% QoQ to IDR 1.74 trillion with the OPM down to 16.1% from 17%.
This resulted in bottom line growth of -55.4% YoY to IDR 584 billion, compared to 1Q2020 (-71%) and 2Q2020 (-58%). But for 9M2020, ICBP still booked positive bottom line growth of +2% YoY to IDR 3.96 trillion.
We predict ICBP will maintain a single digit sales increased to IDR 45.5 trillion in 2020F and single digit bottom line growth of 8% as we expect higher growth in the 4Q2020.

Valuation: BUY with TP 12,580

We are targeting ICBP to reach IDR 12,580 or 26% upside, which is a 23x PE valuation within one year. Maintain BUY.

Previously

ICBP Jul2020