Indofood
1Q growth was strong (ICBP EBIT 32% y/y growth), sustainability is questionable but at least will be better than last year;
Wage increase (10-12%) tops inflation (5%); Jan to Mar saw an uptrend, No numbers released for April.
Sales contribution:66% noodles, 19% dairy, 6% snacks, 2% food seasonings, and rest are nutrition & special foods and beverages.
Noodles:
- Sustainable margin 13-15% even - in the long run
- Indofood has strong penetration. Growth probably 1-3% in the next 5 years. Price will mirror inflation
- Top line will see high single digits growth
- Two players market: INDF (75%) and Wings (25%)
- 95% domestic sales
- Competition: Not worried with Mie mewah as users are very loyal to instant noodle brands
Dairy (stellar 32% y/y vol growth in 1Q, with margin expanding by 10% to 18.5%):
- Expanded in weaker areas esp for milk and condensed milk
- Targeted marketing approach last year
- Margin strength supported by drop in global milk prices
- But milk price is very volatile
- Sustainable margin 7-9%
Snacks:
- Last year saw customers down trading to cheaper products
- Trend reversing back this year
Beverages:
- Guided for 30% growth this year, but only flat in 1Q
- Will revise this down, and increase on dairy
Seasonings: Margin squeezed on higher packaging cost and higher ingredients
Agri: Guiding for flat production this year at max, from -5% y/y earlier. Price expectations? Price taker and they don't hedge
Bogasari: Flour is growing 9% in 1Q; 70% of sales are going into ICBP, rest into industrial players; Inline with industry growth
Downside risks:
- Mixed signals
- They can probably achieve guidance of low double digits growth
INDF breakdown:
- Sales : 52% CBP; 24% Bogasari; 16% Agri; 8% Distribution
- EBIT: 63% CBP; 24% Bogasari; 11% Agri; 1.6% Dist
- Marketing expenses as % of sales have been increasing: ICBP is 4.2% of net sales, budget is 5%; Lower than peers
$INDF $ICBP $SIMP $LSIPBull
