Ground checks – Indofood’s higher flour retail selling price MoM, but flat noodle selling price
Based on our ground checks in a Hypermart store in Jakarta, Indofood Sukses Makmur’s (Indofood) ($INDF) flour Segitiga Biru and Kunci Biru retail selling price increased by 9% MoM and 8% MoM respectively – possibly to pass on higher wheat price which jumped at end of June. Meanwhile, Cakra Biru’s retail selling price remain flat.
Indofood’s instant noodle retail selling prices was also flat MoM. For premium instant noodle, Mayora ($MYOR)’s Bakmi Mewah retail selling price increased by 8% MoM which is now level with Indomie Real Meat’s price. Since its price difference to its competitors narrowed, we see Indofood’s premium instant noodle sales is likely to increase.
Instant noodles accounted for c.52% of Indofood’s consolidated 1H17 EBIT, while flour (Bogasari) contributed 14% to EBIT. We maintain BUY on Indofood with IDR10,300 TP (23% upside) which implies 16x FY18F P/E.
MYOR 3Q16 results: Strong EBIT above our expectation, roughly in-line earnings
Mayora Indah ($MYOR) booked solid 3Q16 results with total revenue of IDR4.0tn, (+28% y-y, -12% q-q), roughly in-line with our quarterly estimate. However, due to higher cost of raw materials (coffee +26% y-y, sugar +69% y-y), gross profit margin was squeezed by more than 100bps, yet MYOR still booked 71% y-y growth in operating profit helped by lower selling expenses especially on A&P costs. Unfortunately, due to the shift from a forex gain in 3Q15 to a forex loss in 3Q16, the company’s net profit was only IDR307bn (+14% q-q, +11% y-y) resulting in 9M16 net profit of IDR898bn (+3.2% y-y) with net margin dropping by 140bps.
Bahana comment: Looking ahead, we expect sustained volume growth and margins on MYOR’s ability to promote its new and existing product and maintain A&P cost below 11-12% of sales. BUY.
Mayora Indah: 3Q16 Beats Expectation ($MYOR; Rp 1,595; Neutral; TP: Rp 1,550)
$MYOR - The biscuit industry is predicted to have a total revenue of Rp18tn in 2016, (+)8.4% YoY, according to the Indonesia Association of Biscuits, Bread, and Instant Noodles (Asrim).
Mayora Indah will still have the largest market share (30%-35%) in biscuit industry, followed by Khong Guan and Nissin with market share of 30% and 15% respectively. Asrim Chairman Sribugo Suratmo said that the new player Asia Sakti Wahid Foods (ASW Foods) has gained 8% market share with its Hatari brand. ASW Foods targets revenue to grow by 25% in 2016. Comment: Mayora has been growing faster than industry with double-digit growth rate.
Mayora Group to operate newest factories for bottled water in Dec’16
The Rp1-1.4 tn investment is spent to boost market share by 5x up to 30-40%. Capacity would increase to 5 mn carton/month (5x current capacity). According to the bottled water producer association (Aspadin), demand for bottled water is up by 9-10% YoY in 2016 from 24 bn liter, where 90% is supplied by SMEs. From the F&B business, Mayora Indah ($MYOR) hopes to revert back to 50:50 revenue contribution from domestic and export sales after slower export growth this year. $MYOR stated that domestic sales has increased by 30% YoY and export by 15% YoY. Mayora’s bottle water, Le Minerale, is not under the listed company.