Indonesia Consumer Neutral Downgrade - Indonesias Consumption Landscape Insights For A Dynamic Market

Equity Research February 13, 2024
Mirae Asset Sekuritas Indonesia

Abyan H. Yuntoharjo abyan.yuntoharjo@miraeasset.co.id
Consumer (Neutral/Downgrade)
Indonesia's consumption landscape: Insights for a dynamic
market
Report summary
Consumerism at its finest

280mn Indonesians, mostly young and active, drive a consumption-fueled economy, but post-pandemic realities are complex.
While the FMCG industry initially thrived, uneven growth persists, with inflation, interest rates, and global woes impacting
spending power, especially for lower income groups. "Revenge spending" post-pandemic gave way to prioritizing necessities,
with smaller purchases and affordable brands favored. Adapting to these evolving preferences and understanding diverse
demographics are key to navigating Indonesia's dynamic consumption landscape.
2024 outlook remain cloudy, with short-lived boost for purchasing in 1H24
Despite achieving the central bank's inflation target, lower minimum wage increases and higher basic good prices dampen
purchasing power. Tightened monetary policies further limit discretionary spending, though commodity prices offer some
reprieve.
Looming looser monetary policies in the second half of 2024 potentially alleviate pressures, while household consumption shows
resilience, driven by sectors like food and apparel as activity increases. Card transactions also maintain growth, albeit slower.
Consumer staples players can capture opportunities in rural areas, targeting the mid-to-low segment and untapped tier-2/3
cities by offering value-driven products. Government aid helps lower-income individuals combat inflation.
However, significant consumption boosts might only come in the latter half of 2024, as post-election policy clarity and potential
BI rate cuts provide guidance.
Downgrade to Neutral
Indonesian consumer industry faces headwinds in 2024, prompting a neutral stance. Lower growth catalysts, controlled inflation,
and subdued wage increases paint a cautious picture. Short-term boosts from holidays may offer temporary relief, but tight
monetary policies and global anxieties cloud the outlook. Investors entering the sector are advised to tread carefully, considering
risks like rising commodity prices, a weakening currency, and intense competition.
Key investment metrics

Market cap * Last price* Target price Upside P/E (x) Div yield (%) ROE (%)
Company Ticker Rating
(IDRbn) (IDR) (IDR) (%) 2023F 2024F 2023F 2024F 2023F 2024F
Sumber Alfaria Trijaya AMRT 107,133 Buy 2,580 3,200 24.0 31.3 26.8 0.9 1.3 27.5 26.8
Indofood CBP Sukses Makmur ICBP 135,861 Trading Buy 11,650 13,000 11.6 15.2 14.1 1.4 2.6 22.3 20.8
Indofood Sukses Makmur INDF 56,195 Trading Buy 6,400 7,100 10.9 6.0 5.9 4.3 4.3 16.2 14.9
Unilever Indonesia UNVR 111,398 Hold 2,920 3,100 6.2 23.3 20.5 4.6 4.6 142.0 138.2
Note: *Data as of February 12, 2024
Source: Mirae Asset Securities Research Estimates
Analysts who prepared this report are registered as research analysts in Indonesia but not in any other jurisdiction, including the US.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF THE REPORT.
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Consumer February 13, 2024
C O N T E N T S
Consumer (Neutral/Downgrade) 1
Sector at a glance 4
Consumerism at its finest 4
Investment thesis 5
Inflation target 5
Government regulation 7
Sugar excise implementation 7
Recent update regarding PPH21 8
Navigating USDIDR 8
Consumer preference and its changes 8
Urbanization: potential key for faster growth 9
Household consumption 10
Average household consumption per capita 11
Direct Cash Assistance Amid Rising Volatile Food Prices 12
Card transaction on Indonesia consumption 12
Fintech lending to spur the consumption 13
Significant events in 2024 14
Liquidity boost by the election 14
Brace for a BI rate cut boost 14
Downgrade to neutral 15
Sumber Alfa Trijaya 16
Company at a glance 17
Revenue contribution 17
It’s diversified store 17
Investment Thesis 18
Recent financial and operational performance 21

High base affecting the SSSG 21
Valuation and recommendation 23

Transfer coverage, Reiterate Buy recommendation 23
Indofood CBP Sukses Makmur 25
Prominent player in the Indonesia FMCG 26
Indonesia's instant noodle market leader Higher than pre-pandemic level27

Top-line growth missed the management’s guidance 29
Noodle sales volume remains strong in contrast to dairy and nutrition 29
Earnings in line with our estimate; forex gain curbed by Rupiah depreciation 29
Mirae Asset Sekuritas Indonesia Research 2

Reiterate Trading Buy recommendation 32

Indofood Sukses Makmur 34

Transfer coverage, Maintain Trading Buy recommendations 41
Unilever Indonesia 43
The long journey of UNVR 44
Boycott recovery 45
Valuation and recommendations 51

Transfer coverage, Hold recommendations 51

Sector at a glance
Consumerism at its finest

Understanding Indonesian consumption requires insights into the country's
demographics and economic landscape. Indonesia, with a population of around 280
million people, sees 70% of its population in the productive age range. The country's
growing economy, largely driven by consumption, has positioned the FMCG industry as
a key player in shaping Indonesian consumption patterns.
Figure 1. Demographic chart Indonesia
(mn people) Young Productive Old

350
300
250
200
150
100
50
0
2010 2015 2020 2025F 2030F 2035F 2040F 2045F
Source: BPS, Mirae Asset Sekuritas Indonesia Research
In the post-pandemic era, consumption growth has not yet reached levels seen in the
pre-pandemic period. There is a noticeable disparity in consumer spending, with the
middle to higher-income groups experiencing higher growth compared to the middle to
lower-income segments. Factors such as inflation, interest rates, minimum wage
growth, and global political tensions contribute to this divergence.
A shift in Indonesian consumption behavior is evident. During the pandemic, limitations

on outdoor activities led to increased indoor spending. The phenomenon of "revenge
spending" emerged when restrictions were lifted, leading people to spend the money
they had saved during the pandemic on activities like shopping and dining out. This
marked a turning point for Indonesia's consumer market, especially impacting the
middle-to-higher consumer segment.
External factors like the rise in interest rates, higher inflation due to supply chain
disruptions in 2019, and the El-Nino phenomenon affecting commodities in 2023 have
prompted consumers to focus on basic goods to secure their food supply. The delayed
start of rice farming and harvesting due to El-Nino has added to the challenges faced by
producers.
Consumers are adapting to the changing landscape by shifting their consumption

behavior to smaller ticket sizes, prioritizing basic needs, and cutting back on non-
essential items. The middle and lower segments are particularly affected, reducing the
size of their shopping baskets and opting for more affordable brands. In contrast, the
middle to upper segment is strategizing their purchases, buying in bulk to reduce prices.

Investment thesis
Indonesia's minimum wage increase lower than expected

With Indonesia inflation has become more controlled, thus leading the government to
set the 2024F minimum wage increase at half of the 2023 growth, around 3-4% YoY. We
believe this should affect positively towards those in the lower-to-middle-income
segment, whereas more job are open due to company might absorb additional labor
costs without impacting their profit. This should also help the unemployment rate in
Indonesia with low skill level. As for the implications towards consumer industry topline,
the increase on disposable income for low-wage earners will be smaller, and the
potential boost towards consumer spending might less noticeable.
Figure 2. Indonesia’s minimum wage trajectory
(IDR '000) Min. Avg wage (L) Growth (R) (%)
3,500 25.0
3,000
20.0
2,500
15.0
2,000
1,500
10.0
1,000
5.0
500
0 0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024F
Source: Statistics Indonesia, Mirae Asset Sekuritas Indonesia
Inflation target
As of the latest data, Indonesia inflation in January stands at 2.6% YoY, reflecting a
deeper decline in inflation, attributed to the changes in the base year calculation. The
main contributor to inflation remains volatile food, with a particular focus on rice. Rice
ASP has reach IDR14,950/kg (+2% MoM). However, other food prices have experienced
significant declines, such as cayenne pepper and red chili pepper, which saw reductions
of -40.5% MoM and -14.8% MoM, respectively.
The government's response to these dynamics has been proactive, notably with the
recent update to boost production. In line with this effort, the government has increased
its fertilizer subsidy, contributing to the management of food prices.
Core inflation, excluding volatile food and energy components, has recorded growth
below 2% for four consecutive months. This indicates a weaker domestic demand. The
expectation is that, with the potential implementation of a looser monetary policy in the
second half of 2024, there could be an uptick in demand in foreseeable future as
changes in monetary policies usually has lagging effect towards the economy.

Volatile food remains the largest contributor to inflation in Indonesia. Interventions or

stimulus measures in this sector could play a crucial role in controlling the overall
inflation rate and keeping it within the desired range. This aligns with the government's
efforts to address economic challenges and support stability in essential commodities.
Figure 3. Food prices volatility Figure 4. Yearly change in food prices in January 2024
Chicken (L) Egg (L) Garlic 37.5

(IDR)
Onion (L) Red chili pepper (L)(IDR)
85,000 Rice (R) 15,500 Red chili pepper 36.5
Sugar 18.6
75,000 15,000
Rice 15.9
65,000 14,500
Chicken 5.6
55,000 14,000 Beef 0.4
Egg -2.8
45,000 13,500
Cooking oil -3.3
35,000 13,000
Onion -7.8
25,000 12,500 Cayenne pepper -9.0
-20.0 -10.0 - 10.0 20.0 30.0 40.0
Source: Center of Strategic Food Price Information, Mirae Asset Sekuritas Indonesia Source: Center of Strategic Food Price Information, Mirae Asset Sekuritas Indonesia
Research Research
Consumer goods companies continue to benefit from soft commodity

prices, with slight increases anticipated in the future
There has been general decrease in the price of cost input, which is raw material prices
that used in consumer staples, such as CPO, skimmed milk powder, and wheat. This has
been significant towards the industry as their margin continue to improve. Albeit already
stabilizing, world phenomenon such as El-Nino and global supply chain might still have
some effect on this prices. We expect that consumer industry might secure their raw
material needs, with inventory level of 3-6 months, generally. Some of the commodity
prices that are affecting the consumer companies were below.
Wheat: Wheat price has been decline to USD595/Bushel (+5.4% QoQ; -19.8% YoY), largely
due to better yields and better global supply chain As per last update from Argusmedia,
it’s crop yield might decline, as farmer might delaying crop emergence, due to dry
conditions. This would set to fall to the lowest level since 2012, as the planting acreage
will be lower. We still closely monitor production and its yield as the weather and
geopolitical tension might go.
Crude Palm Oil (CPO): CPO price currently stands at MYR3,947/MT (+7.9% QoQ; +2.0%
YoY), showing a decline from the peak of MYR5,450/MT back in April 2023. This current
price are still above the 5-year average price. As there are substitute vegetable oil, and
other external factor such as currency depreciation, dynamics of supply and demand,
we might see price more easing in 2H24, as supply improves with the dry season ends.
Our commodity analyst expect prices to remain between MYR2,995-4,316/MT, with a
base case assumption of MYR3,706/MT.
Skimmed Milk Powder: SMP price currently standing at EUR2,492/MT (-4.2% QoQ; +0.1%
MoM), showing its stability. We believe that in the near-term outlook, price might remain
high due to tight supply and continued demand. Production has inched up slightly,
which we believe that major exporting countries of this commodity are still maintaining
their production level.
Sugar: Current sugar price is USD24/lb (-13.5% QoQ; +12.0% YoY). With the tight global
supply, due to adverse weather in key producing regions, rising input costs for farmers,
this has led sugar price to increase, reaching 12-year highs in recent weeks. We believe
that in the near term sugar supply might still not quite to meet the demand, as the
demand still increasing. We believe there should be an easing of sugar price as La-nina
might come, and reduce cost input for farmers. Another key aspect to see is that
Indonesian sugar association estimates that sugar price might go between IDR18,000-
20,000/kg.
Figure 5. Sugar and skimmed milk prices are rising, wheat is strengthening, and crude palm
oil (CPO) is stable as the year ends.
(x) Wheat CPO Skimmed milk powder Sugar
2.5
2.0
1.5
1.0
0.5
0.0
2/21 8/21 2/22 8/22 2/23 8/23 2/24
Source: Mirae Asset Sekuritas Indonesia Research
Government regulation
Sugar excise implementation
The Indonesian government has been considering the implementation of a sugar excise
for several years, driven by concerns about public health due to high sugar consumption
and the potential to generate additional revenue. However, the process has faced
delays, attributed to economic considerations and the need for further regulatory
clarity.
In the latest development, as of September 2023, the Health Ministry has indicated that
regulations related to the sugar excise are in the finalization phase and could be ratified
in 2024. Key details, including the excise rate, the types of beverages subject to the tax,
and the implementation date, remain unclear at this point.
It's worth noting that the implementation of a sugar excise is expected to have
implications for the FMCG sector. MSMEs may be exempted from the excise, potentially
providing them with a competitive advantage. On the other hand, larger FMCG
companies may face additional costs, and there is a possibility that these costs could be
passed on to consumers.
The finalization and implementation of the sugar excise will likely bring more clarity to
its impact on the industry and consumer behavior once the details are officially
communicated by the government. As we have channel check with several players, they
still don’t get any announcement from the government regarding the regulation.

Recent update regarding PPH21

Indonesia's recent overhaul of the PPh21 tax system introduces the "Tarif Efektif Rata-
rata" (TER) system, aiming to simplify calculations and enhance transparency. The
impact of these changes on individuals varies across income segments.
For middle-to-lower earners: The TER system considers individual non-taxable income
thresholds (PTKP), potentially providing proportional benefits. However, the overall
impact could be neutral or slightly positive, depending on individual circumstances and
the deductions claimed.
For middle-to-upper earners: The impact is less straightforward. Some individuals may
experience minimal changes if they effectively utilize various deductions. However,
others might face slightly higher taxes if specific deductions are no longer applicable
under the TER system.
In summary, the changes are likely to have a neutral or mixed impact on both income
segments.
Navigating USDIDR
Regarding the currency outlook, we anticipate that the USDIDR is poised to strengthen
in the coming years, building on the positive trend observed in February. With effective
measures to control inflation, the easing of economic and political uncertainties, and a
projected rate cut in 2H24 as per our economist's forecast, we foresee appreciation, with
a target of USD/IDR reaching 14,535 in 4Q24. This anticipated strengthening could have
a psychological impact, boosting consumer confidence and encouraging higher
spending and consumption, thus positively impacting the consumer industry's top-line
growth. We believe that the lagging effect of changes in monetary policies will likely be
felt in 2H24 and in 2025.
Foreign investors are expected to return to more "riskier" asset classes, increasing their
portion in the Indonesia equity market. According to our latest strategy report, the initial
asset allocation is likely to be towards banking and the consumer industry.
Additionally, companies burdened with higher interest payment rates may experience a
reduction in their financial expenses, potentially leading to an increase in margins. We
expect these structural changes in monetary policies to have a positive impact on the
consumer industry, whether in cyclical or non-cyclical sectors.
Consumer preference and its changes

With the less favorable economic conditions and recent outbreaks and pandemics in
recent years, Indonesia's consumption patterns are undergoing a shift. The challenging
economic conditions are driving consumers toward more value-based purchasing and a
decrease in discretionary spending.
Consumer industries are adapting to changes. Consumers are now restricting their
purchases, and more stability and a positive outlook are expected to be the structural
catalysts for these changing behaviors. Today, consumers are focusing on frozen foods,
RTD and RTE products, and smaller packages. One common factor among these
preferences is convenience. With travel restrictions lifted, people are engaging in more
activities, and their purchases are geared towards convenience, rather than stay-at-
home support. Consumers are now eating less at home and opting for on-the-go snacks.

In response to the less favorable economic conditions, consumers are engaging in more
"product testing," meaning they prefer to buy smaller packages initially for their tertiary
consumption. The adaptability of Indonesia's consumer industry to changing economic
conditions demonstrates its resilience.
Smaller pack sizes and enhanced product efficacy are emerging as significant factors for
encouraging repeat purchases. In a market where value for money and convenience are
increasingly prioritized, these attributes cater to the practical needs of consumers,
making products more accessible and appealing for regular consumption.
Within the consumer goods sector in Indonesia, category-specific trends have shown
resilience and adaptability amidst changing market conditions. In the Food category,
despite price increases, key segments like pantry essentials (canned and frozen foods)
and on-the-go snacking products have experienced increased demand, indicating a
preference for convenience and long shelf-life items in response to economic
uncertainty.
The Home Care and Personal Care categories have also exhibited growth, despite a
decrease in volume purchased. This suggests a consumer shift toward more value-
based purchasing, focusing on essential and high-utility products in these segments.
Consumers are becoming more conscious of their spending, opting for products that
offer greater value and utility, even if it means buying less overall.
In the Beverages market, particularly in out-of-home consumption, there has been

promising growth driven by younger demographics. Consumers in this segment are
increasingly gravitating toward new and innovative offerings, such as functional drinks
and RTD teas and juices. This reflects a growing interest in health and wellness, as well
as the convenience of on-the-go consumption.
Urbanization: potential key for faster growth

Indonesia is undergoing continued growth and transformation, transitioning from rural
to more advanced urban areas. The country is experiencing higher urbanization rates in
various provinces, according to data from the Central Bureau of Statistics (BPS). The
trend indicates that more people are migrating to urban cities in search of greater
opportunities.
As urbanization progresses, several indicators, such as the rapid expansion of

infrastructure, increased access to financing in rural areas, and potential incentives from
government, suggest ongoing initiatives from both the government and private entities
to develop new urban centers. We deemed rural cities remain attractive as their growth
should be higher compared to urban area, due to their more favorable minimum wage
conditions.
The impact of urbanization extends to the consumer industry, where shifting

consumption behaviors and increased spending accompany rising economic activities.
The growing middle class with higher disposable income contributes to a greater
demand for a wider range of consumer goods.
With the information above, we believe consumer industry strategies that focus on
sustainable expansion into tier-2 and tier-3 cities are expected to benefit companies by
increasing sales and enhancing distribution channels to effectively reach target
audiences.

BPS projects that by 2035, the urbanization rate will reach 66.6%, compared to the
current 57-60%. Provinces like Lampung, West Sumatra, Nusa Tenggara Timur, Sulawesi
Tengah, Sulawesi Tenggara, and Gorontalo are expected to experience faster
urbanization rates, with a CAGR above 2% for 25 with 2010 as the baseline.
This accelerated urbanization is anticipated to have a positive impact on economic

activities, indirectly influencing the consumer industry landscape. Companies
strategically positioning themselves to cater to the changing demographics and
preferences in these urbanizing areas stand to benefit from the evolving market
dynamics.
Figure 6. Percentage of urban population
(%)
70
60
50
40
30
20
10
0
2010 2015 2020 2025F 2030F 2035F
Household consumption
Household consumption in Indonesia continues to show resilience despite challenges,
maintaining positive growth trends, albeit at a slower pace. Even though that it has been
seen increasing by the overall trends, different income segment might be
disproportionately impacted. Some factor to consider is 1) inflationary pressure on
volatile foods and lower minimum wage growth; 2) government subsidy might alleviate
the burden of inflation on certain segment of the populations; and 3) shifting in
spending patterns driving household consumption were higher growth in FnB and
restaurant and hotels. As this continued demand for leisure and dining indicate a desire
for normalcy and experiences despite economic challenges, reflecting underlying
confidence to spend within adjusted budget.

Figure 7. Household consumption remain stable
(IDRtr) FnB (L) Apparel (L) Restaurant & hotel (L) (%)
Others (L) Growth (R)
3,000 16
2,500
12
2,000
8
1,500
4
1,000
0
500
0 -4
12/20 6/21 12/21 6/22 12/22 6/23 12/23
Average household consumption per capita

The increase in average household consumption per capita, particularly in rural areas,
suggests a positive trend in spending. Here are some key observations:
Stronger Growth in Rural Areas: The data indicates that the growth in spending is
more pronounced in rural areas. This could be attributed to several factors, including
increased economic activities, rising incomes, or changes in consumer behavior.
Impact of Inflation on Volatile Foods: The growth in household consumption may be

influenced by inflation, particularly on volatile foods. As the cost of essential food items
rises, households may allocate a larger portion of their expenditure to food-related
items, contributing to overall consumption growth.
Non-Food Items: While the data doesn't show a specific trend in spending on non-food
items on a yearly basis, it's essential to consider that spending patterns on non-food
items can be influenced by various factors, including economic conditions, consumer
preferences, and market trends.
Figure 8. average urban household consumption/capita Figure 9. average rural household consumption/capita
(IDR) Urban (L) Growth (R) (%) (IDR) Rural (L) Growth (R) (%)
1,600,000 12 1,200,000 16
1,400,000 14
10 1,000,000
1,200,000 12
8 800,000
1,000,000 10
800,000 6 600,000 8
600,000 6
4 400,000
400,000 4
2 200,000
200,000 2
0 0 0 0
2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022
Source: BPS, Mirae Asset Sekuritas Indonesia Research Source: BPS, Mirae Asset Sekuritas Indonesia Research

Direct Cash Assistance Amid Rising Volatile Food Prices

With the rise of volatile food price, government might aid more assistance to maintain
people purchasing power, thus aiding lower bracket families. In response, it gave cash
assistance of IDR7.5tr towards 18.8mn families. This can be in cash transfer or as a given
goods such as rice. Our stance is that government might give additional aid if rice price
still increasing and not reduced. Many social aid program not only by these two, but also
from other programs as well. Government for 2024 has provide c.IDR496tr, an increase
of IDR20tr from previous year
Table 1. Social aid program by the government aid

Social aid program Beneficiary
PKH 10mn families
Bansos Sembako 18.8mn families
ATENSI (for children) 38.4k participant
ATENSI (for elderly) 32.6k participant
ATENSI (people with disabilities) 53.8k participant
ATENSI NAPZA and ODHIV 14.7k participant
JKN (PBI) 96.8mn participant
JKN (PBPU) dan PB Class-III 49.6mn participant
PIP 20.8mn participant
KIP 1mn students
BBM 19.58mn KL
LPG (3kg) 8.03 metric ton
KUR 12mn debtor
BLT Desa 2.96mn families
Food assistance (10kg of rice/monthly) ~21-22mn KPM
El Nino Cash transfer 18.8mn KPM
Source: RAPBN 2024, Mirae Asset Sekuritas Indonesia Research
Card transaction on Indonesia consumption

Credit and debit card transactions continue to be indicators of people's purchasing
power, showcasing resilience and growth even during economic downturns. These
lagging indicators, reflecting the delayed impact of economic fluctuations on consumer
behavior. Despite sustained activity, concerns arise about the long-term sustainability of
such growth, especially in high-interest-rate eras where the cost of borrowing may
constrain purchasing power.
However, amidst these concerns, the current trend of loosening monetary policies
provides a potential remedy. Central banks' efforts to stimulate economic activity and
reduce interest rates could alleviate the burden on consumers, potentially boosting their
purchasing power and maintaining the momentum of electronic transactions despite
economic challenges.

Figure 10. Monthly average debit card transaction Figure 11. Monthly average credit card transaction
(IDR) Avg. debit card transaction Growth (R) (%) (IDR) Avg. credit card transaction Growth (R) (%)
1,000,000 25 1,200,000 40
900,000 20
1,000,000 30
800,000
15
700,000 20
800,000
600,000 10
10
500,000 5 600,000
0
400,000 0
400,000
300,000 -10
-5
200,000
200,000 -20
100,000 -10
0 -15 0 -30
11/21 5/22 11/22 5/23 11/23 11/21 5/22 11/22 5/23 11/23
Source: BI, Mirae Asset Sekuritas Indonesia Research Source: BI, Mirae Asset Sekuritas Indonesia Research
Fintech lending to spur the consumption
The increase in fintech lending, particularly in Java and Ex-Java regions, is a noteworthy
trend. The total fintech lending amounting to IDR696tr (+53.2% YoY). Java, in particular,
has experienced more significant and faster growth in fintech lending, likely due to its
accessibility compared to traditional credit card options, and more exposed to the new
trends across the globe.
The average transaction in Java and Ex-Java regions is around IDR814,509 (+19.1% YoY)
and IDR880,256 (+27.3% YoY), respectively. The manageable NPL ratio of less than 3%
as of September suggests that individuals are managing their repayments well.
The impact of fintech lending on Indonesia's consumption behavior is an interesting

aspect. The trend seems prevalent among individuals aged 25-35 years old, according
to channel checks with fintech lenders. The aggressiveness of fintech lenders, coupled
with the entry of new players in the industry, may have a certain level of influence on
consumption patterns. However, the correlation might not be highly significant.
It's noted that the trend in fintech lending could benefit non-food goods categories
indirectly. Channel checks indicate that individuals are more inclined to purchase
durable goods such as electronics. This indirect effect on purchasing power suggests
that people have more discretionary spending for non-durable goods, making the
consumer has “more” purchasing power.
The continued increase in fintech lending in Java regions may be attributed to their
higher exposure to global trends. On the other hand, Ex-Java regions, considered more
conservative approach in their living, may exhibit a slower adoption of fintech lending
practices.

Figure 12. Java region monthly average transaction Figure 13. Ex-Java region monthly average transaction
(IDR) Avg transaction (L) Growth (R) (%) (IDR) Avg transaction (L) Growth (R) (%)
1,000,000 40 1,000,000 40
800,000 30 800,000 30
600,000 20 600,000 20
400,000 10 400,000 10
200,000 0 200,000 0
0 -10 0 -10
1/22 5/22 9/22 1/23 5/23 9/23 1/22 5/22 9/22 1/23 5/23 9/23
Source: BI, OJK, Mirae Asset Sekuritas Indonesia Research Source: BI, OJK, Mirae Asset Sekuritas Indonesia Research
Significant events in 2024

Liquidity boost by the election
The upcoming 2024 election in Indonesia is expected to impact liquidity during the
campaign period. This presents potential benefits for consumer companies with small-
ticket size products, such as MYOR and ICBP. Anticipating a second round of the election,
increased campaign activities are likely to affect economic conditions, particularly in
terms of consumption and investment. However, the impact is not expected to be
significantly detrimental.
Historical trends indicate that during presidential elections, there is often a noticeable
drop in consumer companies' topline performance in the first half of the year following
the campaign. Consumer industry companies might focus on maintaining their market
share during this period and could increase AMP spending to sustain market share,
while margin were maintained as cost input tends to soften. The consumer industry
might experience a wait-and-see period until the new president is elected and new
policies are unveiled.
We advised investor to adopt a cautious "wait-and-see" approach during this period of

uncertainty. The clarity on the next president and the introduction of new policies by the
incoming government are expected to positively influence investor confidence in the
market, potentially reflecting in the share prices of companies in the industry.
We believe the right play for investor is to search for time for entry, as there might given
some new indications for the ongoing industry might forward. Nonetheless, there has
been
Brace for a BI rate cut boost

Two recent periods have witnessed a striking rise in both consumer non-cyclical and
consumer cyclical sectors. Daily essentials and discretionary purchases continue to fuel
this growth, even during economic stumbles. Companies like UNVR, ICBP, MYOR, and
AMRT have been frontrunners in this exciting trend. But beyond just investor sentiment,
a potent catalyst is about to take center stage: the anticipated Bank of Indonesia (BI)
rate cut in the second half of 2024.

Lower rates, more spending power: Historically, BI rate cuts have acted as a shot in the
arm for consumer industries. A closer look towards figure and table below, the sector
are more prosper during historical previous rate cut cycles in 2011-2013 and 2015-2018,
as investor gather towards Indonesian equity market, yielding higher return.
Figure 14. Revenue growth of consumer goods companies
(%, YoY) Election INDF ICBP UNVR AMRT
50
40
30
20
10
-10
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Company data, Mirae Asset Sekuritas Indonesia Research
Table 2. Consumer sector performances vs. BI Rate and JCI (IDR)

2011 2013 Return (%) 2015 2018 Return (%)
BI Rate (%) 6.75 5.75 7.75 4.25
JCI 3,549 5,069 42.8 5,289 6,597 24.7
UNVR 3,300 6,100 84.8 7,175 10,775 50.2
ICBP 2,460 6,550 166.3 7,250 8,975 23.8
MYOR 438 1,245 184.2 970 2,410 148.5
AMRT 370 710 91.9 476 595 25.0
Average Return of IDXNONCYC Big Caps 131.8 61.9
Downgrade to neutral
The consumer industry in Indonesia is anticipated to face challenges in 2024, prompting
a downgrade in stance to neutral. The lack of significant catalysts for the consumer
sector, coupled with factors such as controlled inflation and lower minimum wage
growth, contributes to headwinds. While positive impacts are expected in the first half
of 2024 due to events like Lebaran, Imlek, and the presidential election, the overall
outlook remains cautious.
Tight monetary policies and adverse global political situations are identified as factors
affecting people's purchasing power. Investors are advised to carefully consider the
timing of entry into the consumer industry, considering potential risks. Key downside
risks highlighted include higher-than-expected soft commodity prices, a weakening
Rupiah, intense sector competition, and a reduction in people's purchasing power.


AMRT IJ · Consumer Staples
Sumber Alfa Trijaya

Minimarket giants
(Transfer Coverage) Target price Upside Current price (2/12/24)
Buy IDR3,200 24.0% IDR2,580
JCI Index 7,298 Market cap (IDRbn) 107,133 Shares outstanding (mn) 41,524 Free Float (%) 40.5
Report summary
Poised for growth in Indonesia's dynamic minimarket scene

Alfamart and Indomaret, dominating the minimarket sector with over 41,000 stores, wield strong brands and expansive
distribution networks. Both giants are actively pursuing store expansion and positive sales growth, employing strategies such as
price cuts and promotions to win customer loyalty. Alfamart, in particular, has gained an edge with its membership program,
complemented by digital initiatives like Alfagive, positioning itself for sustainable growth.
Despite an anticipated flat revenue growth in 2024, AMRT (Alfamart) might experience benefits from key events in the first half
of the year, including elections and holidays. These events are expected to boost consumer spending, potentially mitigating
economic headwinds for the company.
Valuation and recommendation

We maintain our forecast and changing to Buy recommendation for AMRT as there are negative foreign outflow that reflecting
the share price to decline, with an unchanged TP of IDR3,200/share. Our target price implies 38.9x/33.3x P/E in 23F/24F. Our Buy
recommendation for AMRT is based on: 1) continuous store expansion; 2) improvements in the economic condition; 3) diversify
it’s store with new innovations; and 4) margin expansion.
Key data
Price performance Earnings and valuation metrics

(D-1yr=100)
JCI AMRT (FY Dec. 31) 2021 2022 2023F 2024F 2025F
110
Revenue (IDRbn) 84,904 96,925 111,799 127,660 144,538
100 Operating profit (IDRbn) 2,784 3,770 4,904 5,717 6,364
90 Net profit (IDRbn) 1,926 2,855 3,419 3,996 4,440
P/E (x) 55.6 37.5 31.3 26.8 24.1
80
2/23 4/23 6/23 8/23 10/23 12/23 2/24 P/B (x) 13.7 11.6 9.5 7.9 6.6
ROA (%) 7.2 9.8 10.3 10.4 10.0
ROE (%) 22.6 27.9 27.5 26.8 25.1
(%) 1M 6M 12M Dividend yield (%) 0.4 0.7 0.9 1.3 1.4
Absolute -2.3 -11.3 -12.5 Source: Company data, Mirae Asset Sekuritas Indonesia Research estimates
Relative -3.1 -16.9 -18.6
Company at a glance
Poised for growth in Indonesia's dynamic minimarket scene

Established in 1989 by founder Djoko Susanto, PT Sumber Alfaria Trijaya Tbk (AMRT) is a
minimarket chain. It holds the second position in total store count, with 18,375 stores,
trailing behind the industry giant, Indomaret, which boasts 22,080 stores.
Table 3. Shareholder’s structure (as of November 2023)

Entity Numbers of Shares Ownership (%)
PT Sigmantara Alfindo 22,084,986,059 53.19%
Feny Djoko Susanto 265,850,300 0.64%
Harryanto Susanto 190,560,200 0.46%
Budiyanto Djoko Susanto 138,969,300 0.33%
Public 18,844,135,841 45.38%
Total 41,524,501,700 100.00%
Source: Company data, Mirae Asset Sekuritas Indonesia Research
Revenue contribution
AMRT's business segments are divided into food and non-food, contributing 70.5% and
29.5%, respectively. In terms of revenue distribution by region, it is somewhat evenly
spread, with the largest contribution coming from Ex-Greater Jakarta, accounting for
38%.
Figure 15. AMRT revenue contribution by category (9M23) Figure 16. AMRT revenue contribution by regions (9M23)
(%) (%)
29.5 29
34
Greater Jakarta
Food
Ex-Greater Jakarta
Non-food
Ex-Java
70.5
38
Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research
It’s diversified store

AMRT has been leveraging a diverse range of retail formats, with a centralized buying
process. To cater more different and segmented demographic, AMRT launched other
type of store, which is Alfamart, Alfamidi, Lawson, Dan+Dan, and the recent new store is
Alfa X.

Investment Thesis
Minimarket giants
The Indonesian minimarket sector continues to expand, dominated by two giants:

Alfamart and Indomaret. With a combined presence of over 40,800 stores and extensive
distribution networks, they create a significant barrier to entry for new players. Their
strong brand reputation further solidifies their competitive edge.
Both companies are expected to aggressively grow their store counts while maintaining
market share and positive SSSG. Price cuts and promotional offers are prevalent,
highlighting their focus on customer acquisition and retention. Ultimately, the player
with the most loyal customer base will likely win the long-term market share battle.
Alfamart is actively building customer loyalty by expanding its membership program.

New and existing customers are encouraged to join, and active members already
contribute significantly (58.6% in Q3 2023) to revenue. With Alfagift, their digital app,
further enhances convenience and attracts new members.
Shifting expansion strategy, Alfamart is scaling back on Lawson expansion (previously

adding over 400 stores). This move suggests a focus on catering to a wider consumer
base by converting some Lawson stores to the more mass-market Alfamart concept.
Alfamart concept stores are expected to see more expansion than Lawson. We forecast
an additional 1,580 Alfamart stores in 2024, supporting sustainable SSSG growth.
Expansion is likely to prioritize locations outside Greater Jakarta.
While overall revenue growth may remain stagnant due to ongoing economic pressures,
AMRT is positioned to benefit from several key events in 2024. Although the Indonesian
Retailers Association forecasts similar growth to last year, AMRT might see positive
impacts from events like the presidential election, Eid-Fitr celebrations, and Chinese New
Year. These occasions typically drive increased consumer spending, potentially
mitigating the headwinds from broader economic trends.
Figure 17. MT store in Indonesia
(No. of store) 2022 9M23

25,000
20,000
15,000
10,000
5,000
0
Indomaret Alfamart Alfamidi Circle K Lawson Foodmart Mini
Source: Nielsen, Mirae Asset Sekuritas Indonesia

Figure 18. AMRT's revenue could surpass Indomaret's with a Figure 19. AMRT's market share continues to increase in the
store count nearly matching Indomaret's MT Minimarket segment
AMRT (%)
(IDRbn) (%)
Indomaret
40
120,000 Revenue gap relative to AMRT 16 39.4
39.0
39
100,000
12
38
80,000 37.3
8
36.9
60,000 37
4 36.0
40,000 36
0 35
20,000
0 -4 34
2020 2021 2022 9M23 2020 2021 2022 9M22 9M23
Source: Mirae Asset Sekuritas Indonesia Research Source: Mirae Asset Sekuritas Indonesia Research
Figure 20. AMRT new store
Company owned stores (L) Franchise (L) No. of new stores (R)
(stores) (stores)
CAGR : 7.6%
25,000 2,000
20,000 1,600
15,000 1,200
10,000 800
5,000 400
0 0
2018 2019 2020 2021 2022 2023F 2024F
Source: Company data, Mirae Asset Sekuritas Indonesia Research estimates

Figure 21. Revenue trajectory Figure 22. Cost of sales trajectory
(IDRbn) Revenue (L) Growth (R) (%) (IDRbn) Cost of revenue (L) Growth (R) (%)
140,000 20 120,000 16
120,000 100,000
16
12
100,000
80,000
80,000 12
60,000 8
60,000 8
40,000
40,000
4
4 20,000
20,000
0 0 - 0
2018 2019 2020 2021 2022 2023F 2024F 2018 2019 2020 2021 2022 2023F 2024F
Figure 23. EBIT trajectory Figure 24. Net profit trajectory
(IDRbn) EBIT (L) Growth (R) (%) (IDRbn) Net profit (L) Growth (R) (%)
5,000 160 4,500 140

4,500 140 4,000 120
4,000 120 3,500 100
3,500 100
3,000
3,000 80 80
2,500
2,500 60 60
2,000
2,000 40 40
1,500
1,500 20
1,000 20
1,000 -
500 -20 500 -
- -40 - -20
2018 2019 2020 2021 2022 2023F 2024F 2018 2019 2020 2021 2022 2023F 2024F
Figure 25. Margin trajectory Figure 26. SSSG trajectory
(%) GPM EBITDA margin EBIT margin NPM (%)
25 8
6
20
4
15 2
-
10
-2
5
-4
- -6
2018 2019 2020 2021 2022 2023F 2024F 2018 2019 2020 2021 2022 2023F 2024F

Recent financial and operational performance
High base affecting the SSSG

The company revenue for AMRT was recorded at IDR26tr (-5.30% YoY, +8.0% QoQ),
aligning with our/consensus estimates of 71.6%/73.1%. The improvement in same-store
sales growth (SSSG) in 4Q is believed to be a response to inflation, passing through to
customers, coupled with the seasonality of 4Q, which typically has the largest
contribution of the year.
Costs, including cost of sales and operating expenses (opex), have been increasing as
expected, with normal salary growth and slightly higher purchases, likely in preparation
for major events such as the end-of-year holiday, Christmas, and the upcoming Eid al-
Fitr and Chinese New Year. Consequently, EBIT stands at IDR435bn (-47% QoQ; +3% YoY),
with cumulative EBIT for the year at IDR2tr (+25% YoY).
For 3Q23 and 9M23, net profits for AMRT were IDR578bn (+16.1% QoQ; -31% YoY) and
IDR2.2tr (+25.1% YoY), respectively. Considering the inflationary effect squeezing
margins, it is anticipated that the management might increase prices.
Looking ahead to 2024, it is suggested that industry growth might be similar to the
previous year, given the less favorable macroeconomic conditions until 1H24. Factoring
in the lagging impact of the loosening monetary policy, it is expected that the effects
should be more pronounced in 4Q24.
Table 4. AMRT’s quarterly earnings results (IDRbn)

3Q22 4Q22 1Q23 2Q23 3Q23 YoY (%) QoQ (%) 9M22 9M23 YoY (%) Mirae 9M23/ Cons* 9M23/
Asset Mirae Cons*
2023F Asset (%) (%)
Revenue 24,252 24,786 26,167 27,667 26,191 8.0 -5.3 72,139 80,025 10.9 111,799 71.6 109,475 73.1
Food 16,381 17,946 18,733 19,678 18,021 10.0 -8.4 49,388 56,431 14.3
Non-food 7,871 6,840 7,434 7,989 8,170 3.8 2.3 22,751 23,594 3.7
COGS -19,365 -19,578 -20,472 -21,927 -20,729 7.0 -5.5 -57,324 -63,127 10.1
Gross profit 4,887 5,207 5,696 5,740 5,461 11.8 -4.9 14,815 16,897 14.1 24,357 69.4 23,123 73.1
Food 3,064 3,659 3,782 3,805 3,692 20.5 -3.0 9,302 11,280 21.3
Non-food 1,823 1,548 1,913 1,935 1,769 -2.9 -8.6 5,513 5,618 1.9
Operating expense -4,465 -4,023 -4,928 -4,922 -5,027 12.6 2.1 -13,202 -14,876 12.7
EBIT 422 1,185 768 818 435 3.0 -46.9 1,613 2,021 25.3 3,898 51.9 4,787 42.2
Other income (expense) 241 250 248 275 337 40.1 22.5 723 860 19.0
Operating profit 663 1,435 1,015 1,094 772 16.5 -29.4 2,335 2,881 23.4
Finance income 5 11 19 12 20 263.9 62.8 27 50 83.8
Finance expenses -45 -48 -49 -46 -36 -19.8 -22.3 -136 -131 -3.4
Pre-tax profit 631 1,390 984 1,062 756 19.9 -28.8 2,228 2,802 25.8
Income tax expense -106 -264 -176 -194 -138 30.3 -28.7 -396 -508 28.4
Net profit 498 1,104 776 837 578 16.1 -31.0 1,751 2,190 25.1 3,419 64.1 3,549 61.7
Gross margin (%) 20.2 21.0 21.8 20.7 20.9 0.71 pts -1.02 pts 20.5 21.1 0.58 pts
EBIT margin (%) 1.7 4.8 2.9 3.0 1.7 0.83 pts 0.02 pts 2.2 2.5 0.29 pts
Net margin (%) 2.1 4.5 3.0 3.0 2.2 0.71 pts 0.06 pts 2.4 2.7 0.31 pts
Note: *Data as of October 31st, 2023

Figure 27. Quarterly revenue Figure 28. Quarterly cost of sales
(IDRbn) Greater Jakarta Ex-greater Jakarta Ex-Java (IDRbn)

40,000 25,000
35,000
30,000 20,000
25,000
15,000
20,000
15,000
10,000
10,000
5,000 5,000
-
-5,000 -
3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23
Figure 29. Quarterly EBIT Figure 30. Quarterly net profit
(IDRbn) Greater Jakarta Ex-greater Jakarta Ex-Java (IDRbn)
1,200
3,000
1,000
2,000
800
1,000
600
-
400
-1,000 200
-2,000 -
Figure 31. Quarterly margin Figure 32. Quarterly SSSG
(%) (%, YoY)

25 20
15
20
10
15 5
0
10
-5
5 -10
-15
2Q18
3Q18
3Q19
4Q19
3Q20
4Q20
4Q21
1Q22
4Q22
1Q23
1Q18
4Q18
1Q19
2Q19
1Q20
2Q20
1Q21
2Q21
3Q21
2Q22
3Q22
2Q23
3Q23
-
3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23

Transfer coverage, Reiterate Buy recommendation

We maintain our forecast and Buy recommendation for AMRT with an unchanged TP of
IDR3,200/share. Our target price implies 38.9x/33.3x P/E in 23F/24F. Our Buy
recommendation for AMRT is based on: 1) continuous store expansion; 2) improvements
in the economic condition; 3) diversify it’s store with new innovations; and 4) margin
expansion. Downside risk were: 1) slower-than-anticipated growth SSSG, and 2) less
favorable environment to increase domestic consumption.
Figure 33. AMRT’s forward P/E band
(x)
P/E Mean -1 SD +1 SD -2 SD +2 SD
60
50
40
30
20
10
0
2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24

Sumber Alfaria Trijaya (AMRT IJ)
Comprehensive Income Statement (Summarized) Balance sheet (Summarized)

(IDRbn) 12/21 12/22 12/23F 12/24F (IDRbn) 12/21 12/22 12/23F 12/24F
Revenue 84,904 96,925 111,799 127,660 Current assets
COGS -67,330 -76,902 -87,442 -100,653 Cash & equivalents 3,270 3,819 5,009 6,490
Gross profit 17,575 20,022 24,357 27,006 Receivables 2,027 2,490 2,757 3,279
Opex -14,791 -16,252 -19,453 -21,289 Inventories 8,755 9,128 10,380 11,948
EBIT 1,822 2,798 3,898 4,538 Others 160 227 262 300
Other income / (expenses) 962 973 1,006 1,179 Total current assets 14,212 15,664 18,407 22,017
Finance income 61 38 56 64 Non-current assets
Finance cost -322 -183 -559 -638 Fixed assets - net 6,463 7,204 7,925 8,788
Profit before income tax 2,442 3,617 4,401 5,143 Others 6,696 7,878 9,118 10,461
Income tax expenses -478 -710 -902 -1,054 Total non-current assets 13,158 15,082 17,043 19,249
Non-controlling interest 37 52 79 93 Total assets 27,370 30,746 35,450 41,266
Net profit 1,926 2,855 3,419 3,996 Current liabilities
EBITDA 3,307 3,901 4,980 5,760 ST bank loans 779 446 335 383
Account payables 12,946 13,504 15,332 17,649
Margin (%) 12/21 12/22 12/23F 12/24F Other current liabilities 2,651 3,439 3,777 4,270
Gross profit 20.7 20.7 21.8 21.2 Total current liabilities 16,376 17,389 19,444 22,301
Operating profit 3.3 3.9 4.4 4.5 Non-current liabilities
Net profit 3.9 4.0 4.5 4.5 Long-term financial liabilities 1,047 1,244 1,342 1,532
EBITDA 2.3 2.9 3.1 3.1 Others non-current liabilities 519 642 716 786
Total non-current liabilities 1,566 1,886 2,058 2,318
Growth (%) 12/21 12/22 12/23F 12/24F Total liabilities 17,942 19,276 21,502 24,620
Revenue 12.0 14.2 15.3 14.2 Shareholders' equity 9,223 11,222 13,620 16,225
Operating profit 64.9 35.4 30.1 16.6 Non-controlling interests 204 249 328 421
EPS 81.4 48.3 19.8 16.9 Total liabilities and equity 27,370 30,746 35,450 41,266
EBITDA 6.7 17.9 27.7 15.7
Cash Flows (Summarized) Forecasts/Valuations (Summarized)

(IDRbn) 12/21 12/22 12/23F 12/24F 12/21 12/22 12/23F 12/24F
Cash Flows from Op. Activities 2,727 4,042 4,886 5,512 P/E (x) 61.4 41.4 34.6 29.6
Net profit 1,926 2,855 3,419 3,996 P/B (x) 15.2 12.8 10.5 8.7
Depreciation 1,485 1,103 1,083 1,222 EV/EBITDA (x) 35.8 30.2 23.4 20.1
Change in working capital -583 89 490 377 EPS (IDR) 46.4 68.8 82.3 96.2
Others -102 -5 -106 -83 BPS (IDR) 187.7 222.1 270.2 328.0
Cash Flows from Inv. Activities -2,232 -3,022 -2,937 -3,345 DPS (IDR) 9.3 18.8 24.1 33.7
Capex -1,098 -1,678 -1,679 -1,917 Payout ratio (%) 36.4 40.5 35.0 35.0
Others -1,134 -1,344 -1,259 -1,428 Dividend yield (%) 0.3 0.7 0.8 1.2
Cash Flows from Fin. Activities -1,102 -471 -758 -687 Accounts receivable turnover (x) 48.2 44.8 45.6 44.8
Change in liabilities -590 341 184 611 Inventory turnover (x) 7.7 8.4 8.4 8.4
Change in equity 0 0 0 0 Accounts payable turnover (x) 6.9 7.3 7.3 7.3
Dividends paid -386 -780 -999 -1,398 ROA (%) 7.2 9.8 10.3 10.4
Others -126 -33 57 100 ROE (%) 22.6 27.9 27.5 26.8
Increase (decrease) in cash -608 549 1,191 1,480 Current ratio (x) 0.9 0.9 0.9 1.0
Beginning balance 3,878 3,270 3,819 5,009 Net gearing (x) Net cash Net cash Net cash Net cash
Ending balance 3,270 3,819 5,009 6,490 Interest coverage ratio (x) 5.7 15.3 7.0 7.1
Note: Net profit refers to net profit attributable to controlling interests


ICBP IJ · Consumer Staples
Indofood CBP Sukses Makmur

Beyond borders, rooted at home
Trading Buy IDR13,000 11.6% IDR11,650
Report summary
Prominent player in the Indonesia FMCG

As the price of noodles increases amid lower purchasing power, sales volume has seen a decline. However, higher margins,
facilitated by a more stable cost input, contribute to the overall financial performance. The shift in consumer habits, with a
decrease in home-cooking, has impacted consumption, although it remains above pre-pandemic levels.
ICBP's focus on the international market is notable, although inflationary pressures and increased competition, compounded by
USDIDR depreciation, pose challenges to the company's financial performance. These external factors are influencing ICBP's
initial expansion expectations.
Reiterate Trading Buy recommendation

We have rolled forward our valuation to FY24F and maintain our target price of IDR 13,000, our target price based on a P/E ratio
of 15.7x for 23F and 15.8 for 24F (near -1SD of its 5-year average P/E). We believe that the current valuation of ICBP is
undemanding and already near -1.25SD of its 5-year average P/E when we exclude the effects of forex gain (loss), considering
the growth in revenue and its profitability.
Key data

(D-1yr=100)
JCI ICBP (FY Dec. 31) 2021 2022 2023F 2024F 2025F
120
Revenue (IDRbn) 56,804 64,798 67,391 71,711 76,347
110
EBIT (IDRbn) 11,550 12,414 14,295 14,742 15,761
100
Net profit (IDRbn) 6,399 4,587 8,912 9,631 10,291
90
EPS (IDR) 549 393 764 826 882
80
2/23 4/23 6/23 8/23 10/23 12/23 2/24 BPS (IDR) 2,923 3,131 3,715 4,231 4,785
P/E (x) 21.2 29.6 15.2 14.1 13.2
P/B (x) 4.0 3.7 3.1 2.7 2.4
(%) 1M 6M 12M EV/EBITDA (x) 12.2 12.1 10.2 9.5 8.5
Absolute 4.3 1.5 13.1 ROA (%) 5.8 3.9 7.4 7.5 7.5
Relative 3.5 -4.0 7.0 ROE (%) 20.0 13.0 22.3 20.8 19.6
Company at a glance
Prominent player in the Indonesia FMCG

PT Indofood CBP Sukses Makmur Tbk (ICBP) was established in 1982 and operates in the
food division for the Indofood Group. The company is involved in various categories
including noodles, dairy, snacks, food seasoning, nutrition and specialty foods, and
beverages.

PT Indofood Sukses Makmur Tbk 9,391,678,000 80.53%
Public (<5% ownership) 2,270,230,000 19.47%
Total 11,661,908,000 100.00%
ICBP is known for its significant revenue contribution from the noodles division,
particularly the popular "Indomie" brand, which holds a majority of the market share in
the instant noodles segment in Indonesia. The company has established manufacturing
facilities globally, including in Malaysia, Africa, the Middle East, and southeastern
Europe, allowing it to expand its footprint and introduce Indonesian flavors to
consumers worldwide.
ICBP has pursued a global growth strategy, as evidenced by its acquisition of Pinehill
Company Limited, an instant noodles producer with operations in Africa, the Middle
East, and southern Europe. This strategic move aligns with the company's goal of
expanding its presence internationally while maintaining a strong position in the
domestic market.
In addition to the noodles division, ICBP's other food divisions also play a significant role
in the Indonesian consumer market. With the market share in various segments still
being fragmented, there are opportunities for the company to consolidate and further
capture market share in these segments.
Figure 34. Revenue contribution by geographic (9M23) Figure 35. Revenue composition by segment (9M23)
(%) (%)
Noodles
Dairy
6.8
24.0 Indonesia
Snack foods
Middle East &Africa 11.6
Other Asia Food seasonings

Others
69.4 Nutrition & special
76.0 foods
Beverages

Investment Thesis
Indonesia's instant noodle market leader

Higher than pre-pandemic level
The instant noodle sector within ICBP has witnessed a rise in both volume and price over
the year. Data from BPS indicates an average price of IDR 3,110/unit in December 2022,
followed by a significant ASP hike in 2023. This can be attributed to inflationary pressures
and the need for producers to maintain margins by passing on increased input costs.
While home-cooking during the pandemic initially boosted consumption, per capita
intake seems to have dipped as people are now dining out more and engaging in more
out-of-home activities. Despite this recent decline, consumption remains higher than
pre-pandemic levels. In response to these shifting trends, ICBP's strategy might shift
towards maximizing operating margins through lower input costs thanks to declining
commodity prices.
Looking beyond domestic markets, noodle consumption is nearing its sustainable

growth limit, pushing ICBP towards international expansion. Indomie's strong brand
recognition and unique flavors offer an edge over competitors like ramen in specific
markets like the Middle East and Africa. However, high inflation in these regions might
temper initial growth expectations due to geopolitical tension on the area.
Figure 36. Instant noodle price over the years Figure 37. Market share of noodles
(IDR/unit)
3,200
3,000
2,800
2,600
2,400
2,200
2,000
12/15 12/16 12/17 12/18 12/19 12/20 12/21 12/22
Source: BPS, Mirae Asset Sekuritas Indonesia Research Source: Mirae Asset Sekuritas Indonesia Research
Competition within other segment

Increased competition and currency depreciation are leading ICBP to potentially prioritize
its Pinehill project. As the year progresses, the company faces a more competitive
landscape. Additionally, the depreciation USDIDR has exposed them to unhedged
currency risk, translating to higher interest expenses. These factors combined might
prompt ICBP to adopt a more conservative growth strategy in other segments, potentially
focusing resources on the Pinehill project.

(IDRtr) Noodles Dairy (%) (IDRtr) (%)

Snack foods Food seasonings 50 30
Nutrition & special foods Beverages
80 25 45
25
40
20
60 35
20
30
15
25 15
40
10 20
10
15
20
5 10
5
5
0 0 0 0
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
(IDRtr) Noodles Dairy (%) (IDRtr) (%)

Snack foods Food seasonings 12 120
20 Nutrition & special foods Beverages 30
100
25 10
15
80
20 8
60
10
15 6 40
5 20
10 4
0
0
5 2
-20
-5 0 - -40
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
Figure 42. Margin trajectory Figure 43. Forward P/E band
(%) (x) P/E Mean -1 SD

40 26 +1 SD -2 SD +2 SD
35 24
30 22
25 20
20 18
15 16
10 14
5 12
0 10
2017 2018 2019 2020 2021 2022 2023F 2024F 2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24

Top-line growth missed the management’s guidance

In 3Q23, ICBP recorded single digit YoY growth in revenue, IDR16.8tr (+3.1% YoY, +9.7%
QoQ). Cumulatively in 9M23, the number stood at IDR51.3tr (+4.9% YoY), which is in line
with our and consensus’ estimates with a run rate of 72% and 75%, respectively.
Domestic sales still face decline, booking IDR11.7tr (-1.4% YoY), while export grew to
IDR5.1tr (+15.3% YoY). With the weakened people purchasing power of lower segment,
due to inflationary pressure of basic goods has been the culprit of the lower sales.
Nonetheless, we still foresee that rice price hike could benefit ICBP by increasing noodle
sales volume in the future.
Noodle sales volume remains strong in contrast to dairy and nutrition

In 9M23, sales in every segment grew as follows: noodle (+6.6% YoY), dairy (-5.7% YoY),
snack foods (+10.8% YoY), food seasonings (+8.1% YoY), NSF (+4.4% YoY), and beverages
(+3.0% YoY). From an operational standpoint, the 9M23 sales volume for each segment
was as follows: noodle grew by +3% YoY (+5% YoY domestically and 17% YoY overseas in
3Q23), food seasoning increased by +8% YoY, and snack saw a +2% YoY growth.
However, the other three segments experienced declines as follows: Dairy fell by
approximately -7% YoY, nutrition showed a deeper decline of around -10% to -11% YoY,
and beverages decreased by 2% YoY.
Although noodle sales volume remained robust throughout 3Q, the decline in ICBP's
third-party services for packaging and food seasonings also affected the sales and EBIT
margin of the segment, which could pose a challenge for the segment going forward.
Meanwhile, according to Nielsen, the dairy segment was also affected by an industry
volume slowdown, especially in sweetened condensed milk and liquid milk as well as
intense competition with competitors.
Earnings in line with our estimate; forex gain curbed by Rupiah

depreciation
In light of the Rupiah's depreciation, ICBP incurred an unrealized forex loss, resulting in
a finance income of -IDR1.2tr in 3Q23. This led to a downturn in earnings to IDR1.3tr,
reflecting a -3.2% YoY decrease and a substantial -24.6% QoQ drop. Nevertheless, the
company managed to achieve a cumulative net profit of IDR7.1tr in 9M23, signifying a
remarkable YoY growth of 113%, which is in line with our estimated growth of 73%.
Margin-wise, ICBP has demonstrated resilience amid global economic uncertainties.

Declining soft commodity prices like wheat have allowed ICBP’s improved margins on a
YoY basis, in our view. Nonetheless, we anticipate that the adverse effects of forex losses
may become more pronounced in 4Q23.

Table 6. ICBP’s quarterly earnings results (IDRbn)

Asset Mirae Cons*
2023PF Asset (%) (%)
Revenue 16,316 15,888 19,143 15,335 16,829 3.1 9.7 48,909 51,307 4.9 71,489 71.8 70,204 73.1
Noodles 12,206 11,729 14,013 11,313 12,784 4.7 13.0 35,746 38,111 6.6
Dairy 2,011 2,214 2,695 2,174 1,951 -3.0 -10.2 7,230 6,819 -5.7
Snack foods 981 1,054 1,135 949 1,147 16.9 20.9 2,916 3,231 10.8
Food seasonings 839 724 1,259 783 812 -3.3 3.8 2,639 2,854 8.1
NSF 266 308 317 293 280 5.2 -4.3 853 890 4.4
Beverages 414 376 394 389 422 1.9 8.4 1,169 1,204 3.0
Eliminations -402 -517 -669 -564 -568 41.1 0.6 -1,644 -1,801 9.6
COGS 10,732 10,082 12,182 9,766 10,754 0.2 10.1 32,923 32,702 -0.7
Gross profit 5,584 5,806 6,961 5,569 6,075 8.8 9.1 15,986 18,605 16.4 24,664 75.4 25,142 74.0
Operating expenses -2,180 -2,300 -2,656 -2,335 -2,459 12.8 5.3 -7,078 -7,450 5.3
EBIT 3,404 3,506 4,305 3,235 3,616 6.2 11.8 8,908 11,155 25.2 14,526 76.8 15,143 73.7
Noodles 3,131 3,063 3,773 2,868 3,168 1.2 10.4 7,811 9,809 25.6
Dairy 65 221 194 127 122 87.7 -3.3 449 443 -1.3
Snack foods 82 110 88 72 156 89.2 116.5 204 316 55.1
Food seasonings 76 80 170 103 91 18.7 -12.0 316 364 15.2
NSF 24 23 32 18 19 -22.6 0.8 62 69 11.1
Beverages 23 9 46 47 59 152.8 24.7 66 153 130.6
Eliminations 2 -1 1 -1 1 -25.2 -222.1 0 1 -512.8
Others income (expense) 17 46 16 24 6 -61.8 -74.0 643 -260 -140.5
Operating profit 3,672 3,826 3,992 3,105 3,797 3.4 22.3 9,552 10,895 14.1
Finance income 40 96 1,962 253 -1,211 -3,134.3 -579.2 145 1,004 591.9
Finance expenses -1,574 -1,931 -464 -526 -484 -69.2 -7.9 -4,254 -1,474 -65.4
Pre-tax profit 2,154 2,036 5,507 2,857 2,108 -2.2 -26.2 5,489 10,471 90.8
Income tax expense -486 -394 -1,178 -726 -456 -6.1 -37.1 -1,409 -2,361 67.6
Net profit 1,379 1,278 3,954 1,771 1,335 -3.2 -24.6 3,309 7,060 113.3 9,627 73.3 9,298 75.9
Gross margin (%) 34.2 36.5 36.4 36.3 36.1 1.9 pts -0.2pts 32.7 36.3 3.6 pts
EBIT margin (%) 20.9 22.1 22.5 21.1 21.5 0.6 pts 0.4pts 18.2 21.7 3.5 pts
Operating margin (%) 22.5 24.1 20.9 20.2 22.6 0.1 pts 2.3pts 19.5 21.2 1.7 pts
Net margin (%) 8.5 8.0 20.7 11.5 7.9 -0.5 pts -3.6pts 6.8 13.8 7.0 pts
Note: *Data as of October 31st, 2023, PF: Previous Forecast

(IDRtr) Noodles Dairy (IDRtr)

Snack foods Food seasonings 12
20
16
8
12
8 4
0 0
3Q21 4Q21 1Q22 2Q22 2Q23 3Q23 3Q21 4Q21 1Q22 2Q22 2Q23 3Q23
(IDRbn) Noodles Dairy (IDRbn)

Snack foods Food seasonings
2,500
4,000
2,000
3,500
3,000
1,500
2,500
2,000 1,000
1,500
500
1,000
500
-
0
-500 -500
3Q21 4Q21 1Q22 2Q22 2Q23 3Q23 3Q21 4Q21 1Q22 2Q22 2Q23 3Q23
Figure 48. Quarterly margin Figure 49. Quarterly sales by region
(%) GPM EBITDA margin EBIT margin NPM (IDRtr) Indonesia Middle East and Africa Other Asia Others
40 20
35
16
30
25
12
20
15
8
10
5 4
0
-5 0
3Q21 4Q21 1Q22 2Q22 2Q23 3Q23 3Q21 4Q21 1Q22 2Q22 2Q23 3Q23

Reiterate Trading Buy recommendation

We have rolled forward our valuation to FY24F and maintain our target price of IDR
13,000, our target price based on a P/E ratio of 15.7x for 23F and 15.8 for 24F (near -1SD
of its 5-year average P/E). We believe that the current valuation of ICBP is undemanding
and already near -1.25SD of its 5-year average P/E when we exclude the effects of forex
gain (loss), considering the growth in revenue and its profitability.
Upside risk: 1) sustainable input costs until 1H24; 2) increased margin as as USDIDR
appreciates; and 3) positive development in Middle East and Africa to support long term
growth
Risk to call: 1) higher-than-expected raw material prices; and 2) lower-than-expected

sales growth.
Figure 50. ICBP’s forward P/E band
(x)
26
24
22
20
18
16
14
12
10
2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24
Source: Mirae Asset Sekuritas Indonesia Research estimates

Indofood CBP Sukses Makmur (ICBP IJ)

(IDRbn) 12/21 12/22 12/23F 12/24F (IDRbn) 12/21 12/22 12/23F 12/24F
COGS 36,516 43,005 43,130 45,895 Cash & equivalents 20,378 15,741 23,693 31,055
EBIT 11,550 12,414 14,295 14,742 Others 1,362 1,321 1,463 1,594
Other income / (expenses) 124 964 -337 143 Total current assets 33,998 31,070 39,159 47,549
Finance income 180 241 1,472 1,793 Non-current assets
Finance cost -1,966 -6,185 -1,965 -1,434 Fixed assets 14,176 14,521 15,021 15,548
Income tax expenses -2,038 -1,803 -3,065 -3,607 Total non-current assets 84,018 84,235 85,277 85,954
Non-controlling interest 1,513 1,135 1,348 1,793 Total assets 118,015 115,306 124,436 133,503
EBITDA 12,805 13,656 15,613 16,141 ST bank loans 515 825 741 789
EBIT 20.3 19.2 21.2 20.6 Non-current liabilities
Net profit 11.3 7.1 13.2 13.4 LT bank loans 1,779 1,549 1,348 1,434
Bond payable 38,952 42,968 45,116 46,470
Others non-current liabilities 3,448 3,282 3,415 3,791
Growth (%, YoY) 12/21 12/22 12/23F 12/24F Total non-current liabilities 44,179 47,799 49,878 51,695
Revenue 21.8 14.1 4.0 6.4 Total liabilities 63,075 57,833 59,887 62,580
Gross profit 7.4 11.3 6.4 6.5 Shareholders' equity 34,090 36,519 43,325 49,341
EBIT 26.7 7.5 15.2 3.1 Non-controlling interests 20,851 20,954 21,224 21,583
Net profit -2.8 -28.3 94.3 8.1 Total liabilities and equity 118,015 115,306 124,436 133,503

(IDRbn) 12/21 12/22 12/23F 12/24F 12/21 12/22 12/23F 12/24F
Net profit 6,399 4,587 8,912 9,631 P/B (x) 3.8 3.5 3.0 2.6
Depreciation 1,255 1,242 1,318 1,399 EV/EBITDA (x) 11.6 11.5 9.7 9.0
Change in working capital -1,784 -1,893 145 -179 EPS (IDR) 548.7 393.4 764.2 825.8
Others 40 118 -191 -85 BPS (IDR) 2,923.2 3,131.4 3,715.1 4,230.9
Cash Flows from Inv. Activities -2,811 -1,450 -2,215 -2,004 DPS (IDR) 215.0 215.0 157.3 305.7
Others -864 4 -530 -212 Dividend yield (%) 2.0 2.0 1.4 2.8
Cash Flows from Fin. Activities 7,742 -7,241 -18 -1,400 Accounts receivable turnover (x) 131.1 183.7 146.0 146.0
Change in liabilities 371 -56 236 836 Inventory turnover (x) 6.2 6.0 6.5 6.5
Change in equity 110 211 -270 -50 Accounts payable turnover (x) 10.2 11.6 12.2 12.2
Dividends paid -1,123 -1,026 -1,078 -1,434 ROA (%) 5.8 3.9 7.4 7.5
Others 8,384 -6,371 1,095 -752 ROE (%) 20.0 13.0 22.3 20.8
Increase (decrease) in cash 10,843 -4,637 7,952 7,362 Current ratio (x) 1.8 3.1 3.9 4.4
Beginning balance 9,535 20,378 15,741 23,693 Net gearing (x) 0.7 0.8 0.6 0.4


INDF IJ · Consumer Staples
Indofood Sukses Makmur

Deeply rooted in Indonesia's food culture
Trading Buy IDR7,100 10.9% IDR6,400
Report summary
Deeply Rooted in Indonesia's Food Culture

Indofood's future rests on its CBP segment (56% of revenue), promising growth against flat sales in other areas like flour and
CPO. Falling wheat prices offer CBP a cost advantage later in 2024, but financial concerns surrounding the Pinehill project linger.
Key events in 2024 could boost revenue, but geopolitical risks remain. Our stance on Indofood is neutral - promising CBP
potential balanced by challenges and uncertainties.
Maintain Trading Buy recommendations

We are maintaining our Trading Buy recommendation for INDF with a revised target price (TP) of IDR7,100 from SOTP method.
Applying 49% discount on valuation. Our target price implies a 6.7x/6.5x P/E ratio for 23F/24F, respectively, which is near -1.2
standard deviations (SD) from its 5-year mean P/E.
Key data

(D-1yr=100)
JCI INDF (FY Dec. 31) 2021 2022 2023F 2024F 2025F
120
Revenue (IDRbn) 99,346 110,830 111,187 117,362 123,959
110
EBIT (IDRbn) 17,133 18,683 18,621 19,177 20,382
100
Net profit (IDRbn) 7,662 6,359 9,291 9,600 10,496
90
EPS (IDR) 873 724 1,058 1,093 1,195
80
2/23 4/23 6/23 8/23 10/23 12/23 2/24 BPS (IDR) 5,528 6,132 6,901 7,741 8,732
P/E (x) 7.3 8.8 6.0 5.9 5.4
P/B (x) 1.2 1.0 0.9 0.8 0.7
(%) 1M 6M 12M EV/EBITDA (x) 4.3 4.4 4.2 3.9 3.4
Absolute 0.4 -8.6 -7.2 ROA (%) 4.5 3.5 5.0 4.8 4.9
Relative -0.4 -14.1 -13.3
Notes: NP is attributable to owners of the parent
Company at a glance
Deeply Rooted in Indonesia's Food Culture

Established in 1990, PT Indofood Sukses Makmur Tbk (INDF), commonly known as
Indofood, has been a listed company since 1994. The company operates in various
business segments, including flour, food, crude palm oil (CPO), and distribution. With a
diverse portfolio, Indofood plays a significant role in the Indonesian food and
agribusiness industry.

First Pacific Company limited 4,396,103,450 50.07%
Anthoni Salim 1,329,770 0.02%
Franciscus Welirang 250 0.00%
Taufik Wiraatmadja 50,000 0.00%
Public (<5% ownership) 4,382,943,030 49.91%
Total 8,780,426,500 100.00%
INDF derives its largest revenue contribution from its Consumer Branded Products (CBP)
segment, constituting 56% of the total revenue. The Bogasari flour business is the
second-largest contributor, accounting for 25.3% of the total revenue. While the majority
of sales are still attributed to the domestic market, there has been a notable trend of
increasing export sales, particularly driven by the expansion of the CBP segment into
the Middle East and Africa.
Over the past approximately five years, INDF has achieved double-digit growth at a rate
of 11% (CAGR 2018-2022) with relatively improved profit margins during this period.
Despite facing challenges related to fluctuations in soft commodity prices, Indofood has
demonstrated resilience in maintaining profitability.
The diversified business segments of INDF, coupled with efforts to mitigate external
volatility through hedging strategies, contribute to its relative security in the face of
market uncertainties.
Figure 51. Revenue contribution by regions (9M23) Figure 52. Revenue composition by segment (9M23)
(%) (%) Consumer branded product Bogasari Agribusiness Distribution
6.1 5.8
13.9 12.9
Indonesia
Middle East & Africa
Other Asia
Others 56.0
25.3
77.7

Investment Thesis
Betting on CBP growth to counter flatness in other segments

Indofood navigates a complex landscape, where the towering 56% of its revenue rests
on the shoulders of its Consumer Branded Products (CBP) segment. Like a skilled
tightrope walker, we believe this segment holds the key to growth, potentially balancing
out challenges in other areas.
One such example is the flour division, where tumbling wheat prices offer a glimmer of
hope. Lower flour costs could translate to a profitability boost for CBP in the latter half
of 2024, as input costs decrease. However, not all segments dance to the same tune.
Both Bogasari and the CPO segment face a potential flat performance, mirroring
declines in their respective commodity prices. This bleak outlook could even lead to a
sales decline in 2023, as the company itself warns, with a possibility of stagnant sales in
2024.
While CBP might find solace in falling wheat prices, concerns around the company's
financial health cast a long shadow. The Pinehill project looms large, raising questions
about its potential impact on CBP's financial well-being, despite a seemingly healthy
interest coverage ratio.
Despite the tightrope, cautious optimism emerges with key events like rate cuts, the
presidential election campaign, and Eid-fitr in 2024, potentially triggering additional
revenue growth. However, geopolitical uncertainties act as the wind, threatening to
disrupt the balance.
Therefore, we maintain a neutral stance on Indofood. While the CBP segment offers a
promising handhold, challenges in other areas and lingering financial concerns demand
a cautious approach. Indofood's success hinges on its ability to navigate these
headwinds, capitalize on potential opportunities, and maintain its balance on the
tightrope of its future.

(IDRtr) CBP Bogasari Agribusiness Distribution (IDRtr)

140 90
80
120
70
100
60
80 50
60 40
30
40
20
20
10
0 0
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
(IDRtr) CBP Bogasari Agribusiness Distribution (IDRtr)

25 12
10
20
8
15
6
10
4
5
2
0 0
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
(%) GPM EBITDA margin EBIT margin NPM (x) P/E Mean -1 SD
40 18 +1 SD -2 SD +2 SD
35 16
14
30
12
25
10
20
8
15
6
10 4
5 2
0 0
2017 2018 2019 2020 2021 2022 2023F 2024F 2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24

Food Inflation Hits sales, wheat price drop may offer relief
In 3Q23, INDF's revenue booked IDR27tr (-0.8% YoY, +8.8% QoQ). Cumulatively, recorded
lower growth than our expectations, reaching IDR120tr (+3.8% YoY), with a run rate of 70%
compared to our forecast. This is attributed to a decrease in sales volume in the CBP and
Bogasari segments.
The performance decline due to 1) declining third party service revenue; 2) food inflation
effect, where basic goods price led to downtrading, and consumer opt for its cheaper
substitute; and 3) more intese competition in other segment add pressure. Flour division still
struggle, due to falling wheat prices from its peak. We believe wheat price might decerase in
around 15%, due to better crop in Russia, as this might secure margin for noodle division in
3-6 months period. As for agribusiness, we might expect pricing volatility might affect division
revenue, and translate to impacted margin. Nevertheless, distribution unit show promising
growth, due to higher sales volume from the noodle segment.
INDF net profit booked IDR1.5tr (-11.7% QoQ; -13.1% YoY), and cumulatively IDR7.1tr
(+52.4% YoY). As the reversal of unrealized forex losses in 9M22, the company core profit
(exclude one off) stood at IDR7tr (+52.4% YoY) but still below expectations of our/consensus
of 72%/73%. We observe that the main driver were 1)lower flour prices; 2) contracting CBP
sales in some category; and 3) USDIDR pressure.
The anticipation for the end-of-year celebrations, including Christmas and New Year, coupled
with lower input costs, is expected to contribute to higher sales for UNVR in 4Q23. The
seasonality factor is likely to have a significant impact during the end-of-year season.
Additionally, the expected improvement in people's purchasing power, translating to better
revenue, is anticipated to be more prominent in 2H24 as monetary policies ease. The
combination of these factors may also contribute to increased margin during this period.
The outlook for Bogasari, particularly with regard to flour prices, indicates potential upward
pressure. Recent developments in Russia, such as decreases in wheat plantation area and yield,
along with ongoing geopolitical issues, suggest that flour prices may experience positive
effects. These factors contribute to the anticipation of a favorable impact on Bogasari, with
the potential for higher flour prices.

Table 8. INDF’s quarterly earnings results (IDRbn)

Asset Mirae Cons*(%)
2023PF Asset (%)
Revenue 28,034 30,009 30,543 25,544 27,802 -0.8 8.8 80,822 83,888 3.8 119,508 70.2 116,259 72.2
CBP 16,716 16,345 18,541 15,738 16,991 1.6 8.0 48,913 51,269 4.8
Bogasari 8,281 8,534 8,819 7,026 7,373 -11.0 4.9 23,345 23,218 -0.5
Agribusiness 4,315 5,474 4,017 3,537 4,264 -1.2 20.5 12,296 11,818 -3.9
Distribution 1,386 1,964 1,968 1,648 1,706 23.1 3.5 4,267 5,322 24.7
Eliminations -2,663 -2,308 -2,803 -2,406 -2,531 -5.0 5.2 -7,999 -7,740 -3.2
COGS 19,259 21,116 21,057 17,724 18,924 -1.7 6.8 55,743 57,705 3.5
Gross profit 8,776 8,893 9,486 7,820 8,878 1.2 13.5 25,079 26,183 4.4 37,048 70.7 36,137 72.5
Operating expenses -3,722 -3,653 -4,193 -3,836 -4,027 8.2 5.0 -11,636 -12,056 3.6
EBIT 5,054 5,240 5,293 3,984 4,851 -4.0 21.8 13,443 14,128 5.1 19,552 72.3 19,621 72.0
CBP 3,397 3,612 4,130 3,229 3,611 6.3 11.8 8,796 10,969 24.7
Bogasari 737 534 501 509 595 -19.2 17.0 1,945 1,606 -17.4
Agribusiness 806 1,021 465 152 534 -33.8 251.1 2,321 1,150 -50.4
Distribution 99 60 183 80 96 -2.3 20.7 344 359 4.4
Eliminations 15 14 15 14 15 -4.6 4.1 36 43 18.8
Others income (expense) 304 268 -324 -94 514 69.2 -645.0 742 95 -87.2
Operating profit 5,357 5,508 4,969 3,890 5,365 0.1 37.9 14,185 14,223 0.3
Finance income 115 230 2,270 306 -1,452 -1,362.7 -575.3 366 1,123 206.6
Finance expenses -2,065 -2,557 -779 -866 -877 -57.5 1.2 -5,442 -2,522 -53.7
Pre-tax profit 3,423 3,256 6,473 3,266 3,081 -10.0 -5.7 9,063 12,820 41.4
Income tax expense -902 -747 -1,391 -871 -755 -16.3 -13.4 -2,379 -3,017 26.8
Net profit 1,745 1,713 3,850 1,717 1,517 -13.1 -11.7 4,646 7,083 52.4 10,282 68.9 9,716 72.9
Note: *Data as of October 31st, 2023, PF: Previous Forecast
Figure 59. CBP segment quarterly revenue Figure 60. CBP segment quarterly cost
(IDRtr) Sales (L) Growth (R) (%) (IDRtr) Cost (L) Growth (R) (%)
20 35 20 40
35
30
16 16 30
25 25
12 12 20
20
15
15
8 8 10
10 5
4 4 0
5
-5
0 0 0 -10

Figure 61. Bogasari segment quarterly revenue Figure 62. Bogasari segment quarterly costs
10 30 9 50
9 25 8
40
8 20 7
7 30
15 6
6
10 5 20
5
5 4 10
4
0 3
3 0
2 -5 2
-10
1 -10 1
0 -15 0 -20
Figure 63. Agribusiness segment quarterly revenue Figure 64. Agribusiness segment quarterly cost
6 60 5 50
50 5 40
5
40 4 30
4
4 30 20
3
20 10
3 3
10 0
2
2 0 -10
2
-10 1 -20
1
-20 1 -30
0 -30 0 -40
Figure 65. Distribution segment quarterly revenue Figure 66. Distribution segment quarterly cost
3 80 2 80
70 2 70
2 2 60
60
1
50
2 50 1
40
40 1
30
1 30 1
20
1
20 10
1 0
10 0 0
0 0 0 -10

Transfer coverage, Maintain Trading Buy recommendations

We are maintaining our Trading Buy recommendation for INDF with a revised target
price (TP) of IDR7,100 from SOTP method. Applying 49% discount on valuation. Our
target price implies a 6.7x/6.5x P/E ratio for 23F/24F, respectively, which is near -1.2
standard deviations (SD) from its 5-year mean P/E.
Lower-than-expected soft commodity prices necessitate revising our margin

assumptions for Bogasari and Agribusiness. However, their noodle division shines
bright, buoyed by upcoming elections and a milder minimum wage hike.
The risk factors to our call include 1) higher-than-expected inflation, which could hamper
people's consumption power; 2) lower-than-expected flour prices; and 3) USDIDR
depreciation.
Figure 67. INDF’s forward P/E band
(x)
18
16
14
12
10
0
2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24

Indofood Sukses Makmur (INDF IJ)

(IDRbn) 12/21 12/22 12/23F 12/24F (IDRbn) 12/21 12/22 12/23F 12/24F
COGS 66,872 76,859 76,497 79,806 Cash & equivalents 29,478 25,946 31,169 39,266
EBIT 17,133 18,683 18,621 19,177 Others 4,395 4,133 5,397 5,853
Other income / (expenses) -218 1,010 111 117 Total current assets 54,183 54,877 60,509 70,199
Finance income 397 596 1,112 1,174 Non-current assets
Finance cost -2,885 -7,999 -3,224 -3,404 Fixed assets 46,752 47,411 47,805 48,814
Income tax expenses -3,259 -3,126 -3,913 -4,106 Total non-current assets 125,088 125,557 133,368 137,719
Non-controlling interest 3,567 2,833 3,447 3,404 Total assets 179,272 180,433 193,878 207,918
EBITDA 20,553 22,067 22,252 22,995 ST bank loans 13,306 15,255 16,678 17,604
EBIT 17.2 16.9 16.7 16.3 Non-current liabilities
Net profit 7.7 5.7 8.4 8.2 LT bank loans 5,504 6,205 6,115 6,455
Bond payable 38,952 42,968 44,686 46,027
Growth (%, YoY) 12/21 12/22 12/23F 12/24F Total non-current liabilities 51,882 56,084 58,240 60,787
Revenue 21.6 11.6 0.3 5.6 Total liabilities 92,285 86,810 91,780 96,744
Gross profit 21.4 4.6 2.1 8.3 Shareholders' equity 48,536 53,844 60,596 67,970
EBIT 35.4 9.0 -0.3 3.0 Non-controlling interests 38,451 39,779 41,503 43,204
Net profit 18.7 -17.0 46.1 3.3 Total liabilities and equity 179,272 180,433 193,878 207,918

(IDRbn) 12/21 12/22 12/23F 12/24F 12/21 12/22 12/23F 12/24F
Net profit 7,662 6,359 9,291 9,600 P/B (x) 1.2 1.0 0.9 0.8
Depreciation & amortization 3,421 3,384 3,630 3,818 EV/EBITDA (x) 4.3 4.4 4.2 4.0
Change in working capital -1,894 -4,424 1,035 -2,259 EPS (IDR) 873 724 1,058 1,093
Others 244 77 -156 -188 BPS (IDR) 5,528 6,132 6,901 7,741
Cash Flows from Inv. Activities -5,312 -3,752 -11,422 -8,043 DPS (IDR) 278 278 278 278
Others -1,136 158 -7,530 -3,348 Dividend yield (%) 4.3 4.3 4.3 4.3
Cash Flows from Fin. Activities 8,020 -5,176 2,845 5,169 Accounts receivable turnover (x) 13.0 13.4 13.5 13.5
Change in liabilities 8,350 -5,454 3,661 5,692 Inventory turnover (x) 5.3 4.7 4.9 4.9
Change in equity 1,723 2,465 1,625 1,917 Accounts payable turnover (x) 13.0 14.3 13.0 14.6
Others 388 254 0 0 ROE (%) 16.8 12.4 16.2 14.9
Increase (decrease) in cash 12,141 -3,532 5,223 8,097 Current ratio (x) 1.3 1.8 1.8 2.0
Beginning balance 17,337 29,478 25,946 31,169 Net gearing (x) 0.7 0.8 0.7 0.5


UNVR IJ · Consumers Staples
Unilever Indonesia
Boycott impact wanes: UNVR focuses on rebuilding consumer
trust
Hold IDR3,100 ▼ 6.2% IDR2,920
JCI Index 7,298 Market cap (IDRbn) 111,398 Shares outstanding (mn) 38,150 Free Float (%) N/A
Report summary
Boycott recovery
With boycott impacted it brands and sales, UNVR journey in 2024 seems challenged, with countermeasure to restoring key
channel and regaining consumer trust is their top priority.
Looking ahead, strategic investment, cost reduction, and strong financial base position UNVR well. Stable input costs offer upside
potential lasting in 1H24, while increased marketing could recapture market share.
Overall, despite these challenges, UNVR resilience and strategic moves suggest a bright future with their implementation on
regaining margin and their brand persona.

We are revising down our expected multiple for UNVR, considering a decline in the stock price to 22x P/E for 2024F (near -1.5SD
relative to its 5-year mean P/E). Nevertheless, we are maintaining a Hold recommendation for UNVR with a revised target price
of IDR3,100 (previously IDR3,800).
Key data

(D-1yr=100)
JCI UNVR (FY Dec. 31) 2021 2022 2023 2024F 2025F
110
100 Revenue (IDRbn) 39,546 41,219 38,611 41,262 43,325
90 Operating pofit (IDRbn) 7,678 7,070 6,279 7,175 7,533
80
70 Net profit (IDRbn) 5,758 5,365 4,801 5,447 5,675
60 EPS (IDR) 151 141 126 143 149
50
2/23 4/23 6/23 8/23 10/23 12/23 2/24 BPS (IDR) 113 105 89 107 113
P/E (x) 19.4 20.8 23.3 20.5 19.7
P/B (x) 25.9 28.0 33.1 27.4 25.9
(%) 1M 6M 12M ROA (%) 13.5 15.1 16.6 14.7 14.0
Absolute -15.9 -21.7 -36.2 ROE (%) 29.1 28.7 28.9 31.0 31.0
Notes: NP is attributable to owners of the parent
Relative -16.6 -27.2 -42.3
Company at a glance
The long journey of UNVR

With nearly a century of experience navigating Indonesia's dynamic consumer
landscape, UNVR stands tall as a leading FMCG player. Its success stems from a strategic
blend of heritage, diversification, and innovation. The company operates across two
core divisions: Home & Beauty Personal Care (HPC) and Food & Refreshments (FnR).
Within these divisions, UNVR has meticulously segmented its offerings into five key
categories: Beauty & Well-being, Personal Care, Home Care, Nutrition, and Ice-cream.
This granular approach allows them to cater to diverse consumer needs and
preferences, maximizing market reach and penetration.
UNVR's commitment to innovation fuels its growth. The company boasts over 80 product
launches and relaunches across premium and value segments, recognizing the
affordability concerns of Indonesian consumers. Their strategic introduction of products
priced between IDR 500-2,000 ensures inclusivity and accessibility, fostering brand
loyalty. This loyalty is further solidified by UNVR's impressive brand portfolio – 45 strong,
with 43 being domestically developed. These household names have been around for
generations, creating a deep sense of trust and affinity with Indonesian consumers.
Decades of presence have enabled UNVR to establish a robust distribution network

across the archipelago. Multiple production facilities in Cikarang and Surabaya
efficiently manufacture products, which are then distributed through 35 depots. This
infrastructure ensures seamless product delivery nationwide, effectively serving UNVR's
vast customer base.
Figure 68. UNVR’s revenue contribution by segment (FY23) Figure 69. UNVR sales by region (FY23)
(%) (%)
3.1
35.5
HPC Domestic
FnR Export
64.5
96.9

Investment Thesis
Boycott recovery
While 2023 saw its share of challenges for UNVR, the company demonstrated resilience
and adaptability. Despite the initial drop in key channel run rates due to false
information, their swift response through education and corrective actions yielded
positive results, pushing the rate back to 92% by January 2024. While full recovery might
take time due to religious sensitivities, this progress showcases UNVR's commitment to
regaining consumer trust.
However, the impact wasn't limited to domestic sales. Exports saw a significant 30.8%
decline in FY23, contributing to an overall 6.3% YoY sales drop. Market share also dipped
across various categories, reflecting the broader impact of these external factors.
Looking ahead, one key challenge remains: mitigating negative brand sentiment
through continued consumer education efforts. Navigating this challenge successfully,
coupled with strategic investments and a strong financial base, will determine UNVR's
ability to overcome 2023's setbacks and seize future opportunities.
In line with this vision, management seeks to improve margins while the brand woes
recede. By reducing inventory levels and streamlining operations, they aim to become a
leaner, more attractive company. Additionally, achieving net cash in FY23 and operating
with negative working capital indicates high operational efficiency, despite potential
financial vulnerability. With their available capital runway, we believe UNVR can manage
any short-term issues.
Given the potential for stable input costs, we see limited downside potential for UNVR,
with only upside opportunities remaining. Key events in 2024, such as increased
advertising and promotional budgets, could help them regain lost market share and
boost sales, both in volume and price.
Table 9. Market growth vs UNVR growth

Value Volume
Business unit
Mkt growth (%) ULI growth (%) Mkt growth (%) ULI growth (%)
Personal Care 3.3 2.9 -1.4 -1.0
Nutrition* 1.8 1.3 -1.0 0.0
Home care 0.8 -2.9 0.2 0.0
Beauty & well-being 5.0 -3.1 -0.3 -6.0
Total ex-Ice cream** 2.9 -0.4 -0.1 -0.7
Note: *tea with tea-bag only; **insufficient ice cream market data
Source: Company presentation, Mirae Asset Sekuritas Indonesia Research

Figure 70. Improved UNVR financial health
(IDRbn) Loan Bank balance Net cash/net loan

2,000
1,000
-1,000
-2,000
-3,000
-4,000
2017 2018 2019 2020 2021 2022 2023
Source: Company presentation, Mirae Asset Sekuritas Indonesia Research
In light of uncertainties related to the upcoming presidential election, high-interest rates,

and broader economic challenges, UNVR is expected to maintain flat topline growth in
2024, similar to its performance in 2023. The potential exploration of the higher-growth
value segment, where various local and multinational players are already active, could
offer opportunities for UNVR. This is particularly driven by the increasing consumer
activity in this segment.
However, the competitive landscape remains challenging, with tight competition from
several players in the same product segments posing a risk to UNVR's sales growth
potential. Despite potential opportunities, the company is still navigating through the
impacts of tight competition, particularly from house brands developed by Alfa Mart,
Indomaret, and other modern trade channels. Additionally, products from Wings Group
and Orang Tua Group are observed to be aggressive in competing with UNVR's products.
In light of these factors, a 'Neutral' view is maintained, considering the uncertainties and
competitive dynamics in the market.

(IDRtr) HPC FnR (IDRtr)

50 23
45 22
40 22
35
21
30
21
25
20
20
20
15
10 19
5 19
0 18
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
(IDRtr) (IDRtr)
12 10
9
10
8
7
8
6
6 5
4
4
3
2
2
1
0 0
2017 2018 2019 2020 2021 2022 2023F 2024F 2017 2018 2019 2020 2021 2022 2023F 2024F
(%) GPM EBITDA margin EBIT margin NPM (x) P/E Mean -1 SD
60 60 +1 SD -2 SD +2 SD
50 50
40 40
30 30
20 20
10 10
0 0
2017 2018 2019 2020 2021 2022 2023F 2024F 2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24

Boycott Bites: UNVR faces profit plunge
In 4Q23, UNVR faced a significant decline in net profit, reaching only IDR612bn (-57.2%
QoQ; -18.7% YoY), and cumulatively IDR4.8tr (-10.5% YoY). The downturn in the fourth
quarter was attributed to a boycott, leading to a decrease in revenue to IDR8.1tr (-20.6%
QoQ; -16.3% YoY). The cumulative revenue for the fiscal year stood at IDR38.6tr (-6.3%
YoY). These figures were slightly below both your estimates and consensus, with a run
rate of 96% and 94%, respectively.
In 4Q23, UNVR's Home and Personal Care (HPC) and Food and Refreshment (FnR)
segments recorded revenues of IDR5.2tr (-21.6% QoQ; -18.6% YoY) and IDR2.9tr (-18.8%
QoQ; -11.8% YoY), respectively. The impact of the boycott was evident, leading to a
decline in both volume and price growth, lagging behind the market. UNVR's sales
decline was not confined to the domestic market; it also extended to exports, witnessing
a substantial drop of 30.8%, while the domestic market experienced a 5.2% decline.
In terms of cost dynamics, UNVR managed to maintain costs, with the cost of sales
seeing a decline. This resulted in an increase in gross profit for 4Q23 and FY23, standing
at IDR3.9tr (-24.0% QoQ; -24.7% YoY) and IDR19.2tr (+0.7% YoY), respectively.
Management attributes this performance to the impact of the boycott and a lower
delivery rate in November and December, reflected in the reduced key channel sales to
74%, with October serving as the baseline.
It's worth noting that costs were actually reduced at UNVR, attributed to lower
purchasing costs and labor costs, amounting to IDR2.7tr (-23.2% QoQ; -21.7% YoY) and
IDR162bn (-9.1% QoQ; -16.7% YoY), respectively. This reduction aligns with the
company's strategy to decrease inventory levels and enhance operational efficiency. As
a result, the gross margin for FY23 improved to 49.7% (compared to 46.3% in FY22).
However, the gross margin for 4Q23 was impacted by the boycott, leading to a
reduction. The gross profit for 4Q23 and FY23 amounted to IDR3.9tr (-24.0% QoQ; -4.8%
YoY) and IDR19.2tr (+0.7% YoY), respectively.
UNVR has been actively investing in advertising and promotion, with a noticeable
increase of 14.6% YoY and 16.8% YoY, respectively. Despite these efforts, the operating
profit for 4Q23 and FY23 declined to IDR824bn (-55.0 QoQ; -21.9% YoY) and IDR6.2tr (-
11.2% YoY). The impact of the boycott and the need to counteract negative sentiment
may have contributed to the challenges faced in maintaining operating profit levels.
In 4Q23, UNVR transitioned to operating with net cash, a notable financial position that
could contribute to maintaining margins in the foreseeable future, barring any
significant un-organic growth. This strategic move aligns with the challenging
macroeconomic conditions characterized by tight monetary policies implemented by
central banks globally. The ability to operate with net cash positions the company to
navigate economic uncertainties and potentially capitalize on strategic opportunities.
The company has actively responded to false information affecting its brand persona,
evidenced by the recovery in key channel sales rates to 92% in January. Despite these
efforts, there is an ongoing observation of intensifying competition from several
competitors in the same segment, potentially impacting UNVR's sales growth potential.
The current stance on the company remains "Neutral."

For FY24, the expected topline growth for UNVR is anticipated to remain flat, resembling
the conditions in 2023 due to less favorable macroeconomic conditions. To increase
market share, UNVR is likely to explore the value segment, with a focus on smaller
packages to attract more frequent purchases from consumers. The management has
identified challenges for FY24, including addressing their brand perception in the public
eye and mitigating lingering negative sentiment towards the product.
It's noted that several house brands have developed their own products, and increased
competition is expected in the coming years, with Orang Tua Group and Wings Group
intensifying promotional spending to gain market share in the same product category
as UNVR. The management anticipates an improvement in margins, and it is expected
that the second half of 2024 should see some positive developments.
Table 10. UNVR's quarterly earnings results (IDRbn)

4Q22 3Q23 4Q23 QoQ (%) YoY (%) 12M22 12M23 YoY (%) Mirae Run rate Cons Run rate
Asset (%) 2023F (%)
2023F
Revenue 9,680 10,214 8,106 -20.6 -16.3 41,219 38,611 -6.3 40,262 95.9 41,063 94.0
Home & personal care 6,419 6,671 5,228 -21.6 -18.6 27,256 25,150 -7.7
Foods and refreshment 3,261 3,543 2,877 -18.8 -11.8 13,963 13,461 -3.6
COGS -5,560 -5,057 -4,185 -17.2 -24.7 -22,154 -19,417 -12.4
Gross profit 4,120 5,157 3,921 -24.0 -4.8 19,065 19,195 0.7 19,830 96.8 20,379 94.2
Home & personal care 2,855 3,551 2,630 -25.9 -7.9 13,089 13,205 0.9
Foods and refreshment 1,264 1,606 1,291 -19.6 2.1 5,975 5,990 0.2
Operating expenses -3,066 -3,328 -3,097 -6.9 1.0 -11,995 -12,915 7.7
Operating profit 1,054 1,828 824 -55.0 -21.9 7,070 6,279 -11.2 7,010 89.6 7,300 86.0
Other income (expenses) -4 0 0 NM -106.9 -1 0 NM
Finance income 3 5 13 154.0 368.7 10 29 179.9
Finance expense -26 -17 -27 60.4 1.7 -85 -106 24.4
Pre-tax profit 1,026 1,817 811 -55.4 -21.0 6,994 6,202 -11.3 6,857 90.4 7,214 86.0
Income tax expense -273 -388 -199 -48.7 -27.2 -1,629 -1,401 -14.0
Net profit 753 1,430 612 -57.2 -18.7 5,365 4,801 -10.5 5,280 90.9 5,577 86.1
GPM (%) 42.6 50.5 48.4 -2.1 pts 5.8 pts 46.3 49.7 3.5 pts
Home & personal care 44.5 53.2 50.3 -2.9 pts 5.8 pts 48.0 52.5 4.5 pts
Foods and refreshment 38.8 45.3 44.9 -0.5 pts 6.1 pts 42.8 44.5 1.7 pts
OPM (%) 10.9 17.9 10.2 -7.7 pts -0.7 pts 17.2 16.3 -0.9 pts
NPM (%) 7.8 14.0 7.6 -6.4 pts -0.2 pts 13.0 12.4 -0.6 pts
Note: *Data as of October 25, 2023

(IDRtr) HPC FnR (IDRtr) HPC FnR

12 6
10 5
8 4
6 3
4 2
2 1
0 0
3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23
(IDRtr) HPC FnR (IDRtr)

4 3
3
2
3
2
2
2 1
1
1
1
0 0
Figure 81. Quarterly margin Figure 82. Domestic vs export sales
(%) (IDRtr)
Domestic Export
60 12
50 10
40 8
30 6
20 4
10 2
0 0

Valuation and recommendations
Transfer coverage, Hold recommendations

We are revising down our expected multiple for UNVR, considering a decline in the stock
price to 22x P/E for 2024F (near -1.5SD relative to its 5-year mean P/E). Nevertheless, we
are maintaining a Hold recommendation for UNVR with a revised target price of
IDR3,100 (previously IDR3,800).
We anticipate flat growth in 2024, and think that tight competition and countering the
boycott to brand persona might need time to back to normal, as well as adjustment with
new CEO appointed to sail through Indonesia’s consumer industry with new strategy.
Risk to our call include: 1) higher-than-expected raw material price increase; 2)

weakening of Rupiah against USD; and 3) more intense competition in premium and
value segment.
Figure 83. UNVR’s forward P/E band
(x)
60
50
40
30
20
10
0
2/19 8/19 2/20 8/20 2/21 8/21 2/22 8/22 2/23 8/23 2/24

Unilever Indonesia (UNVR IJ)
Income Statement (Summarized) Balance sheet (Summarized)

(IDRbn) 12/21 12/22 12/23 12/24F (IDRbn) 12/21 12/22 12/23 12/24F
COGS -19,920 -22,154 -19,417 -20,866 Cash & equivalents 325 503 1,021 542
EBIT 7,678 7,070 6,279 7,175 Others 347 515 355 327
Other income / (expenses) 2 -1 0 1 Total current assets 7,642 7,568 6,140 8,414
Finance income 2 10 29 6 Non-current assets
Finance cost -185 -85 -106 -162 Fixed assets - net 10,102 9,536 9,311 8,349
Profit before income tax 7,497 6,994 6,202 7,020 Goodwill 62 62 62 62
Income tax expenses -1,738 -1,629 -1,401 -1,572 Others 1,262 1,152 1,100 1,023
Non-controlling interest 0 0 0 0 Total non-current assets 11,426 10,750 10,472 9,434
Net profit 5,758 5,365 4,801 5,447 Total assets 19,069 18,318 16,613 17,848
EBITDA 8,471 7,469 6,730 7,606 Current liabilities
ST bank loans 1,933 636 210 241
Margin (%) 12/21 12/22 12/23 12/24F Account payables 4,571 4,700 4,064 4,573
Gross profit 49.6 46.3 49.7 49.4 Other current liabilities 5,941 7,107 6,951 7,041
Operating profit 19.4 17.2 16.3 17.4 Total current liabilities 12,445 12,442 11,224 11,855
Net profit 14.6 13.0 12.4 13.2 Non-current liabilities
Long-term financial liabilities 804 648 541 619
Growth (%, YoY) 12/21 12/22 12/23 12/24F Total non-current liabilities 2,302 1,879 2,059 1,912
Revenue -8.0 4.2 -6.3 2.5 Total liabilities 14,747 14,321 13,283 13,768
Gross profit -12.6 -2.9 0.7 3.6 Shareholders' equity 4,321 3,997 3,381 4,080
Operating profit -18.9 -7.9 -11.2 4.4 Non-controlling interests 8 9 10 11
Net profit -19.6 -6.8 -10.5 5.3 Total liabilities and equity 19,069 18,318 16,664 17,848

(IDRbn) 12/21 12/22 12/23 12/24F 12/21 12/22 12/23 12/24F
Net profit 5,758 5,365 4,801 5,447 P/B (x) 31.0 33.5 33.1 27.4
Depreciation & amortization 793 399 451 431 EV/EBITDA (x) 16.1 18.0 16.6 14.7
Change in working capital 914 1,525 1,093 -543 EPS (IDR) 151 141 126 143
Others 46 -5 -88 4 BPS (IDR) 113 105 89 107
Cash Flows from Inv. Activities -513 277 -173 210 DPS (IDR) 166 153 134 136
Capex -440 214 -178 206 Payout ratio (%) 88.4 101.4 95.3 100.0
Others -73 63 5 3 Dividend yield (%) 4.7 4.4 4.6 4.6
Cash Flows from Fin. Activities -7,518 -7,383 -5,567 -5,121 Accounts receivable turnover (x) 8.1 9.8 16.5 8.1
Change in liabilities -1,143 -1,694 -150 53 Inventory turnover (x) 8.1 8.7 8.0 8.5
Change in equity 0 0 0 0 Accounts payable turnover (x) 4.5 4.7 4.5 4.6
Others -41 148 -305 0 ROE (%) 124.4 129.0 142.0 138.2
Increase (decrease) in cash -519 178 518 429 Current ratio (x) 0.6 0.6 0.5 0.7
Beginning balance 844 325 503 113 Net gearing (x) 0.5 0.2 Net cash 0.1
Ending balance 325 503 1,021 542 Interest coverage ratio (x) 41.5 83.0 59.3 44.2

Appendix 1
Important disclosures and disclaimers

Two-year rating and TP history
Company Date Rating TP (IDR) Company Date Rating TP (IDR)
Sumber Alfaria Trijaya (AMRT IJ) 2/13/2024 Buy 3,200 7/7/2023 Trading Buy 8,300
12/12/2023 Trading Buy 3,200 5/19/2023 Trading Buy 7,700
12/11/2023 Trading Buy 3,200 Unilever Indonesia (UNVR IJ) 2/13/2024 Hold 3,100
8/15/2023 Trading Buy 3,200 12/12/2023 Hold 3,800
4/17/2023 Trading Buy 3,200 12/11/2023 Hold 3,800
Indofood CBP Sukses Makmur (ICBP IJ) 2/13/2024 Trading Buy 13,000 10/26/2023 Hold 4,500
12/12/2023 Trading Buy 13,000 7/25/2023 Hold 4,500
12/11/2023 Trading Buy 13,000 7/7/2023 Hold 4,500
8/3/2023 Trading Buy 13,000 5/19/2023 Hold 4,900
5/19/2023 Trading Buy 12,500 10/28/2022 Hold 4,750
Indofood Sukses Makmur (INDF IJ) 2/13/2024 Trading Buy 7,100 7/28/2022 Hold 4,650
8/4/2023 Trading Buy 8,300
(IDR) AMRT Analyst's TP (IDR) ICBP Analyst's TP (IDR) INDF Analyst's TP (IDR) UNVR Analyst's TP
3,500
14,000 10,000 6,500
2,500 12,000 5,500

8,000
10,000 4,500
1,500 6,000
8,000 3,500
500 6,000 4,000 2,500

Feb-22 Feb-23 Feb-24 Feb-22 Feb-23 Feb-24 Feb-22 Feb-23 Feb-24 Feb-22 Feb-23 Feb-24
Stock ratings Sector ratings

Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months
Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months
Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months
Sell Expected 12-month performance: -10% or worse
Rating and TP history: Share price (─), TP (▬), Not Rated (■), Buy (▲), Trading Buy (■), Hold (●), Sell (♦)
* Our investment rating is a guide to the expected return of the stock over the next 12 months.
* Outside of the official ratings of PT Mirae Asset Sekuritas Indonesia, analysts may call trading opportunities should technical or short-term material developments arise.
* The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings.
* TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Disclosures
As of the publication date, PT Mirae Asset Sekuritas Indonesia (“MASID”) and/or its affiliates do not have any special interest in the subject company and do not own 1% or
more of the subject company's shares outstanding.
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Indonesia Consumer Neutral Downgrade - Indonesias Consumption Landscape Insights For A Dynamic Market

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Indonesia Consumer Neutral Downgrade - Indonesias Consumption Landscape Insights For A Dynamic Market

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Equity Research February 13, 2024

Mirae Asset Sekuritas Indonesia

Consumerism at its finest

Key investment metrics

Recent update regarding PPH21 8

Brace for a BI rate cut boost 14

Recent financial and operational performance 21

Valuation and recommendation 23

Recent financial and operational performance 29

Valuation and recommendation 32

Mirae Asset Sekuritas Indonesia Research 2

Reiterate Trading Buy recommendation 32

Recent financial and operational performance 38

Valuation and recommendation 41

Recent financial and operational performance 48

Valuation and recommendations 51

Mirae Asset Sekuritas Indonesia Research 3

Consumerism at its finest

Figure 1. Demographic chart Indonesia

(mn people) Young Productive Old

Source: BPS, Mirae Asset Sekuritas Indonesia Research

A shift in Indonesian consumption behavior is evident. During the pandemic, limitations

Consumers are adapting to the changing landscape by shifting their consumption

Mirae Asset Sekuritas Indonesia Research 4

Indonesia's minimum wage increase lower than expected

Figure 2. Indonesia’s minimum wage trajectory

(IDR '000) Min. Avg wage (L) Growth (R) (%)

Source: Statistics Indonesia, Mirae Asset Sekuritas Indonesia

Mirae Asset Sekuritas Indonesia Research 5

Volatile food remains the largest contributor to inflation in Indonesia. Interventions or

Chicken (L) Egg (L) Garlic 37.5

-20.0 -10.0 - 10.0 20.0 30.0 40.0

Consumer goods companies continue to benefit from soft commodity

Source: Mirae Asset Sekuritas Indonesia Research

Mirae Asset Sekuritas Indonesia Research 7

Recent update regarding PPH21

Consumer preference and its changes

Mirae Asset Sekuritas Indonesia Research 8

In the Beverages market, particularly in out-of-home consumption, there has been

Urbanization: potential key for faster growth

As urbanization progresses, several indicators, such as the rapid expansion of

The impact of urbanization extends to the consumer industry, where shifting

Mirae Asset Sekuritas Indonesia Research 9

This accelerated urbanization is anticipated to have a positive impact on economic

Figure 6. Percentage of urban population

Source: BPS, Mirae Asset Sekuritas Indonesia Research

Mirae Asset Sekuritas Indonesia Research 10

Figure 7. Household consumption remain stable

Source: BPS, Mirae Asset Sekuritas Indonesia Research

Average household consumption per capita

Impact of Inflation on Volatile Foods: The growth in household consumption may be

Mirae Asset Sekuritas Indonesia Research 11

Direct Cash Assistance Amid Rising Volatile Food Prices

Table 1. Social aid program by the government aid

Card transaction on Indonesia consumption

Mirae Asset Sekuritas Indonesia Research 12

Fintech lending to spur the consumption

The impact of fintech lending on Indonesia's consumption behavior is an interesting

Mirae Asset Sekuritas Indonesia Research 13

Significant events in 2024

We advised investor to adopt a cautious "wait-and-see" approach during this period of

Brace for a BI rate cut boost

Mirae Asset Sekuritas Indonesia Research 14