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Danareksa Equity Snapshot - ICBP 16 Mei 2018
May 16, 2018 10:36

Indofood CBP Sukses Makmur(ICBP IJ)

Growth to pick up

Following the release of solid 1Q18 results, we foresee continued strong performance in the coming quarters that will help the FY18 top line growth to reach 8.3% yoy. At the current share price, ICBP trades at 24.1x, below the -1SD of the average 2-y PE. Maintain BUY with a TP of IDR9,400.

Noodles: solid 1Q18 volume and revenues growth. At our recent meeting with the management, we learned that the noodles division booked positive volume growth in 1Q18 on the back of a continued focus on product development and marketing. Exports, which account for around 5% of total revenues, showed robust growth in 1Q18. Going forward, we estimate that the noodles division will book revenues growth of 7.6% yoy in FY18 underpinned by the exports drive and solid domestic sales. In terms of profitability, we foresee a lower EBIT margin of 18.9% on the back of higher raw material prices (especially of wheat).

The other divisions should perform better as well. Dairy booked slightly negative volume growth given sluggish sales in the low-end segment. Nonetheless, Dairy’s liquid products booked positive volume growth supported by continued innovation and the creation of new variants/SKU. As for the Snacks division, it reported negative 1Q18 volume growth as aggressive promotions back in 1Q17 led to a high base. With the support of new biscuit products (Wonderland Wafer) launched in 1Q18, we forecast robust FY18 snack revenues growth of 8.8% yoy. In the beverages business, meanwhile, the company reported flat volume growth as it halted the production of cup beverages last year.  For the nutritional segment, strong growth in 1Q18 was supported by the launch of a cereal drink last year called Go Well.

Maintain BUY with a TP of IDR9,400. We estimate brisker top line growth of 8.3% yoy in 2018 (FY17: +3.6% yoy). Nonetheless, the possibility of currency depreciation and increases in the prices of several major raw materials may narrow the FY18 gross margin to 30.8%, we believe. In turn, this would filter down to a FY18 bottom line of near to only IDR4tn with a lower net margin of 10.3%. At the current share price, ICBP trades at 24.1x, below the -1SD of the average 2-y PE. The upcoming festive season in addition to the national/international events which will take place in the coming quarters bode well for sustained earnings growth, in our view. We maintain our BUY call on the stock with a TP of IDR9,400 based on the median value of the DCF valuation and the average 2-y PE of 26.2x.

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