Indofood CBP Sukses Makmur: Defensive strength in uncertain times
Domestic sales to rebound in 2Q25. In 1Q25, sales in the domestic market grew 0.5% y/y, while sales in the international market grew stronger at 4% y/y, driven by the Middle East and Africa (+6% y/y) and Other Asia (+17% y/y). ICBP’s noodle division posted modest revenue growth of 2% y/y in 1Q25, primarily driven by a 4% increase in volume, with domestic volume up ~1% and overseas up ~13%. Management attributed the softer domestic sales performance across divisions to there being fewer working days (almost one week) due to the Lebaran festive season falling early this year (in the fourth week of March, domestic sales was the softest approaching the holiday). Hence, we expect domestic sales to rebound in 2Q25 post-Lebaran holiday. Management noted that overall, April sales performance has recovered, supporting their decision to maintain an FY25F sales growth guidance of 7-9%.
Despite ICBP implementing a ~3% price increase (IDR100) in February 2025 on domestic noodle products, ASP growth in the domestic noodle segment was muted in 1Q25 as distributors were still selling older inventory. That said, we expect the full benefit of this ASP adjustment to materialise 2Q25 onwards as distributors begin to restock.
Strong presence in overseas markets to provide a buffer against softer domestic consumption. The company has launched lower-priced SKUs in the Africa market to boost volume growth, which more than offset lower ASP. We also expect Pinehill’s sales to support ICBP’s overall performance in 2H25, driven by seasonally stronger demand. Additionally, growth in other Asian markets remains solid, reflecting the brand’s expanding regional appeal. In developed markets, ICBP is making steady progress in the US, with a focus on deepening retail penetration through strengthened distribution channels. This multi-tiered export approach positions ICBP for sustained international growth, reinforcing the company’s competitive positioning in international markets.
Staples powering sustainable growth. Amidst a challenging macroeconomic backdrop, we believe the noodle division (c.70% of 1Q25 sales) should continue to perform as a resilient, affordable staple food, remaining the main growth driver for ICBP. Management noted that Indomie remained the growth driver in 1Q25, and thus no signs of downtrading to more affordable products is seen; nevertheless, ICBP maintains a broad product portfolio that allows flexibility should consumer preferences shift. The brand’s strong equity, pricing power, and accessibility enable it to weather consumer softness with minimal impact. Moreover, key competitors also followed ICBP’s price increase, preserving the relative pricing gap and reinforcing competitive positioning in the domestic market.
ICBP continues to leverage product innovation to support growth, with recent launches aimed at tapping into evolving consumer preferences. Under the dairy division, the company introduced a yogurt for kids with less sugar content. We believe this reflects efforts to align with rising health consciousness among consumers while also remaining competitive and supporting growth in the dairy segment, which has been under pressure amid soft purchasing power and intense competition, particularly in the liquid milk category. However, the visibility on the product’s traction remains limited, given its early phase. ICBP also relaunched its Pop Mie Mini with revamped packaging aimed at enhancing consumer appeal and boosting product visibility. This initiative highlights the company’s ongoing efforts toward broadening its product portfolio. Such moves reinforce the long-term relevance and competitiveness of its brand portfolio.
Full impact of domestic noodle ASP increase to support margins. ICBP implemented a price increase of IDR100 per pack (~3% increase) in February 2025 for domestic noodles, although its full impact will only be realised from 2Q25 onwards due to the timing of the price increase and existing inventory in the supply chain. This increase should help offset higher input costs – particularly CPO – and IDR depreciation. Hence, while gross margin may still decline y/y in 2Q25 due to the absence of high CPO costs in 2Q24, we expect sequential improvement from 1Q25. CPO prices have recently started to decline, which, if sustained, should support further margin improvement in 2H25. Management has reaffirmed its full-year EBIT margin guidance of 20-22%, with 1Q25 core EBIT margin at 22.4%.
Earnings revisions following 1Q25 results. We cut our FY25F earnings forecast by 7%, mainly due to a higher unrealised forex loss from financing activities amid the IDR depreciation. That said, FY25F operating profit was revised up by 2%, supported by tight cost control and higher unrealised forex gains from export operations, helping offset lower revenue projection by 3% amid a challenging domestic economic environment. Post-revision, we project ICBP’s EBIT and earnings to grow by 7% and 43% y/y in FY25F, respectively. Higher earnings growth is expected in FY25F, driven by the absence of impairment losses on investments in associates booked in 4Q24, which was related to the Pinehill business in Nigeria due to currency depreciation in that country. Thus far, we forecast the company will not book another impairment in FY25F. Meanwhile, only minor earnings adjustments were made for FY26F.
Maintain BUY with a revised TP of IDR14,300. Our positive stance is underpinned by the company’s defensive quality, which positions it well amid ongoing pressures on consumer purchasing power. ICBP is also a dominant player in the Indonesian noodles industry, with significant pricing power to offset input cost increases and IDR depreciation. Moreover, we remain constructive on the long-term volume growth potential in key export markets, particularly the Middle East and Africa, where per capita noodle consumption remains relatively low.
Following the earnings revision, we lower our TP to IDR14,300, based on a 16.5x FY25F PE, -0.25SD from its five-year historical average to incorporate any potential currency risks associated with Pinehill's operations and USD bonds. ICBP currently trades at an attractive valuation of c.12.8x FY25F PE, close to -2SD of its five-year historical mean PE.
1Q25 results review
1Q25 earnings in line with expectations. ICBP reported a net profit of IDR2.7tn in 1Q25 (vs. a net loss of IDR1.1tn in 4Q24 due to goodwill impairment loss in Pinehill’s business), marking a +13% y/y growth. This growth was mainly due to higher unrealised forex gain from operating activities of IDR641bn in 1Q25 (vs. IDR51bn in 1Q24). 1Q25 net profit remained within expectations at 24% and 25% of our and consensus’ FY25 earnings estimates, respectively. Nevertheless, ICBP still booked an unrealised forex loss from financing activities of IDR1.2tn (-1.7% y/y) in 1Q25, amid IDR depreciation against the USD. That said, ICBP’s core profit declined 5% y/y to IDR3.1tn in 1Q25, mainly due to higher raw material costs, particularly for CPO.
Meanwhile, ICBP reported an operating profit of IDR5.2tn (+5% y/y, +19% q/q) in 1Q25, surpassing both our and consensus’ expectations and forming 30%/29% of FY25 estimates, respectively. The strong operational performance was driven by a higher unrealised forex gain from operation activities and tight cost control, as total selling, distribution, and G&A expenses fell slightly to 14% of sales in 1Q25, compared to 14.1% in 1Q24. These also mitigated relatively muted revenue growth in 1Q25 (+1% y/y, +18% q/q) amid macroeconomic challenges and gross margin contraction to 36.1% in 1Q25 (vs. 38.2% in 1Q24 and 36.5% in 4Q24).
Overseas market performed better than domestic. ICBP reported 1Q25 revenue of IDR20.2tn (+1% y/y, +18% q/q), within expectations at 25% and 26% of our and consensus' FY25 estimates. In 1Q25, sales in the domestic market booked at IDR14.7tn (+0.5% y/y, +29.7% q/q). Meanwhile, the Middle East and African markets’ sales recorded a better y/y performance in 1Q25 at IDR4.2tn (+6% y/y, -8% q/q), supported with the launch of lower price pack products and adjustment in minimum wage. Sales to other Asian market also increased by 17% y/y and 20% q/q to IDR621bn in 1Q25.
Breaking down by segment, net sales on a y/y basis grew for noodles (+2% y/y), snack foods (+4% y/y), food seasonings (+5% y/y), and nutrition & special foods (+8% y/y) in 1Q25, while declines were seen in dairy (-2% y/y) and beverage (-13% y/y). Volume wise, growth was seen in noodles (+4% y/y), snack foods (+1% y/y), and nutrition & special foods (+3% y/y), while growth was negative in dairy (-3% y/y), food seasonings (-1% y/y), and beverages (-8% y/y). On a q/q basis, net sales grew for noodles (+19% q/q), dairy (+12% q/q), snack foods (+13% q/q), food seasonings (+38% q/q), nutrition & special foods (+8% q/q) in 1Q25, but beverages dropped (-8% q/q).
ICBP’s EBIT margin in 1Q25 was 25.5% (vs. 25.3% in 4Q24 and 24.7% in 1Q24), supported by unrealised forex gain from operating activities. That said, ICBP’s 1Q25 core EBIT margin stood at 22.4%. In 1Q25, EBIT margin for noodles was 25.8% (vs. 26% in 4Q24 and 27.9% in 1Q24), dairy was 10.7% (vs. 9.7% in 4Q24 and 13.1% in 1Q24), snack foods was 3.6% (vs. 9.8% in 4Q24 and 7.7% in 1Q24), food seasonings was 14.3% (vs. 6.8% in 4Q24 and 11.7% in 1Q24), nutrition & special foods was 10.4% (vs. 7.2% in 4Q24 and 9.9% in 1Q24), and beverages was 13.6% (vs. 22.5% in 4Q24 and 16.5% in 1Q24).
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FY Dec | 1Q2024 | 4Q2024 | 1Q2025 | % chg y/y | % chg q/q |
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Revenue | 19,922 | 17,111 | 20,186 | 1.3 | 18.0 |
Cost of Goods Sold | (12,321) | (10,862) | (12,892) | 4.6 | 18.7 |
Gross Profit | 7,601 | 6,249 | 7,294 | (4.0) | 16.7 |
Other Oper. (Exp)/Inc | (2,682) | (1,924) | (2,141) | (20.2) | 11.3 |
Operating Profit | 4,919 | 4,326 | 5,153 | 4.8 | 19.1 |
Other Non Opg (Exp)/Inc | 0.0 | 0.0 | 0.0 | nm | nm |
Associates & JV Inc | 8.10 | (1,494) | 75.8 | 831.9 | (105.1) |
Net Interest (Exp)/Inc | (1,528) | (3,290) | (1,499) | 1.9 | 54.4 |
Exceptional Gain/(Loss) | 0.0 | 0.0 | 0.0 | nm | nm |
Pre-tax Profit | 3,399 | (459) | 3,730 | 9.7 | nm |
Tax | (675) | (101) | (695) | 3.0 | 588.7 |
Minority Interest | (372) | (511) | (378) | (1.6) | (26.0) |
Net Profit | 2,352 | (1,070) | 2,657 | 13.0 | (348.3) |
Net profit bef Except. | 2,352 | (1,070) | 2,657 | 13.0 | (348.3) |
EBITDA | 5,348 | 4,780 | 5,599 | 4.7 | 17.1 |
Margins (%) |
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Gross Margins | 38.2 | 36.5 | 36.1 |
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Opg Profit Margins | 24.7 | 25.3 | 25.5 |
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Net Profit Margins | 11.8 | (6.3) | 13.2 |
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