INDF
Contact our analyst Eka
Buy, 38% upside
6th September 2022
Price Rp 6350
Target price Rp 8790
6th September 2022
Price Rp 6350
Target price Rp 8790
Growth from Bogasari and Distribution
- In 2Q2022, INDF recorded double digit sales growth of +11.4% YoY but a decline of -7.7% QoQ to IDR 25.3 trillion with Bogasari recording the fastest growth.
- Bogasari growth was +25% YoY but -1.2% QoQ to IDR 7.48 trillion. From higher raw material prices, COGS increased +20.7% YoY, so Bogasari EBIT increased only +8.9% due to a higher wheat price in 1H2022.
- Distribution revenue increased +20% to IDR 1.45 trillion with a higher EBIT margin of 9.7%.
- ICBP grew +15% YoY to IDR 15.2 trillion while ICBP’s EBIT margin decreased to 13.2% from 19.8% last year from higher raw material prices.
- Agribusiness sales declined by -6.6% YoY or -4.8% QoQ to IDR 3.89 trillion in 2Q2022 due to lower sales and production volumes from unfavorable weather conditions. Agribusiness EBIT decreased by -16.8% YoY to IDR 480 billion in line with an EBIT margin decrease from 13.8% last year to 12.3%.
- CPO and wheat prices were higher in 1H2022, but we expect they will not rise higher than the current price as we expect supply and demand in the market to normalize.
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2Q2022: Pressure from forex and financial cost
Valuation: Maintain BUY with TP 8,790
- Despite INDF recording higher sales growth, higher financial costs and forex losses put pressure on 2Q2022. INDF’s net profit which decreased -68.3% YoY or -77% QoQ to IDR 541 billion. The NPM also declined to 2.1% from 7.5% last year.
- INDF’s profit before tax also decreased -55.5% YoY to IDR 1.42 trillion with higher finance expenses, +7% YoY and higher forex losses of IDR 1.55 trillion after forex gains last year.
- Operating income still grew slightly +1.2% YoY but declined -30.4% QoQ to IDR 3.62 trillion in 2Q2022 with a lower OPM from 15.7% in 2Q2021 to 14.3% in 1Q2022.
- Due to the pressure from forex losses and higher financial costs in 1H2022, we revise down our INDF bottom line profit forecast for 2022F. We now expect INDF’s profit to reach IDR 8 trillion or +5% YoY growth in 2022F.
Valuation: Maintain BUY with TP 8,790
- We are targeting INDF to reach IDR 8,790 or 38% upside, which is an 8x PE valuation within one year. Maintain BUY.
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