ICBP Sep2022

ICBP

Contact our analyst Eka

Buy, 26% upside
5th September 2022
Price Rp 8,725
Target price Rp 10,970

Double-digit sales growth

ICBP maintained double digit sales growth of +17.5% YoY but had a decline of -10.4% QoQ to IDR 15.4 trillion in 2Q2022. Margins in all ICBP businesses continued to decline because of higher raw material prices (wheat, skim milk powder, CPO) in 2Q2022. Sales to Middle East and Africa grew +32% to IDR 3.53 trillion, while domestic sales grew +12% YoY to IDR 11.03 trillion.
Noodles sales grew +20.6% YoY but were lower -7.8% QoQ at IDR 11.2 trillion even with a higher ASP. The EBIT margin declined from 23.7% last year to 16.6% due to rising raw material costs.
Dairy sales grew +11.3% YoY but declined -12.1% QoQ to IDR 2.44 with a lower EBIT margin of 3.2% from 7.7% in 2Q2021 due to higher skim milk powder prices.
Beverage sales grew YoY and QoQ to IDR 374 billion with a higher EBIT margin of 3.3% from -0.8% in 2Q2021.
Snack Food sales were IDR 923 billion which is an increase of +22.4% YoY but -8.8% QoQ. The snack food EBIT margin decreased to 4.9% from 11.2% last year.
Food Seasoning and Nutrition & special foods had growth of +14.6% and +8% YoY to IDR 808 billion and IDR 270 billion respectively. Both also booked lower EBIT margins of 14.5% and 3,4%.
ICBP has raised selling prices in 1Q2022 and 2Q2022 and has the ability to raise prices again. We maintain our double-digit sales growth target for this year of +21% to IDR 68.4 trillion.

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2Q2022 Result: A net loss

In addition to the impact of rising raw material prices, higher financial costs and foreign losses also weighed on the bottom line profit.
ICBP booked a loss of IDR 9 billion in 2Q2022 from a profit in 1Q2022 of IDR 1.93 trillion. The net profit margin become negative at -0,1% from 11.3% in 1Q2022.
Cost of goods sold increased +27.3% YoY from the increase in raw material prices. As a result ICBP gross profit decreased -0.8% YoY or -23% QoQ to IDR 4.52 trillion in 2Q2022. This resulted in a lower GPM from 34.2% in 1Q2022 to 29.4% in 2Q2022.
ICBP booked higher foreign losses in 2Q2022 of IDR 1.34 trillion from a gain in 2Q2021. As a result profit before tax was lower by -76% YoY or -79% QoQ to IDR 572 billion.
In June the commodity price such as CPO and wheat have shown a decline, but USD/IDR fluctuations will still weigh on bottom line profit. After the 2Q2022 performance we revise down our forecasts, we now expect net profit to reach IDR 5.57 trillion for 2022F which is a decrease of -12.8% YoY.

Valuation: Maintain Buy TP 10,970

We are targeting ICBP to reach IDR 10,970 or 26% upside, which is an 18x PE valuation within one year. Maintain BUY.

Previously

ICBP Jun2022