INDF May2023

INDF

Contact our analyst Eka

Buy, 35% upside
25th May 2023
Price Rp 6950
Target price Rp 9400

Strong performance from ICBP

INDF maintained double-digit sales growth of +11.3% YoY or +1.8% QoQ to IDR 30.5 trillion with strong growth and improved margins from ICBP and the distribution business.
ICBP sales grew by +9.4% YoY to IDR 18.5 trillion with ICBP’s EBIT margin increasing to 22.3% from 19.5%, in line with softer raw material prices and a sales price hike.
Distribution revenue increased by +38% YoY to IDR 1.96 trillion with a higher EBIT margin of 9.3%.
Bogasari growth was +16.4% YoY or +3.3% QoQ to IDR 8.8 trillion while Bogasari's EBIT margin decreased to 5.7% from 1Q2022’s 7.2% on lower wheat prices but was still on target for 5% - 7% in 2023F.
Agribusiness sales declined by -1.7% YoY or -26.6% QoQ to IDR 4.01 trillion while the Agribusiness EBIT margin decreased to 11.6% due to lower CPO prices in 1Q2023.
Volume growth was positive in 1Q2023, and we are expecting higher demand in 2Q2023. We expect INDF's top line sales will reach IDR 119.2 trillion which is +8% growth in 2023F.

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1Q2023: Higher profit margin

INDF’s bottom line profit margin was lifted by ICBP’s higher net, plus gains on forex from financing activities. INDF net profit increased +63.1% YoY or +124.7% QoQ to IDR 3.85 trillion with a higher NPM of 12.6% from 8.6% in 1Q2022.
INDF booked +4.9% YoY growth of gross profit to IDR 9.48 trillion with a lower GPM of 31.1% due to a +14.4% higher cost of sales.
Operating income decreased -4.5% YoY or -9.8% QoQ to IDR 4.97 trillion in 1Q2023 with a lower OPM of 16.3%.
INDF’s profit before tax increased to IDR 6.47 trillion with higher forex gains of IDR 2.05 trillion in 1Q2023.
With the positive impact to margins from softer commodity prices and positive demand growth, we expect INDF’s profit to reach IDR 9.68 trillion in 2023F or +52% growth.

Valuation: Maintain BUY with TP 9,400

We are targeting INDF to reach IDR 4,400 or 35% upside, which is a 9x PE valuation within one year. Maintain BUY.

Previously

INDF Apr2023