Cautious Steps Ahead as Threat Remains Intact
Key Takeaways:
▪ We see downside risk to come from food staples prices hike in 4Q23 and potentially continuing until 2Q24. This is mainly driven by the post-El-Nino effect. NOAA projects the persistence of Strong El-Nino in Apr-Jun’24 (with 62% chance).
▪ The social assistance budget in FY24F has increased by +3.6% YoY to IDR493.5tn (+12.4% YoY from the FY23 outlook). Despite the increase, we do not see a significant addition to the target quota for recipients, especially in the Family Hope Program (PKH) and Social Assistance (Bansos) quotas.
▪ Assuming an excise tax increase of 10%/2% for MBDK and beverage inflation during the 3Y CAGR, respectively, we believe ICBP and MYOR still have leeway to pass on the tax to consumers given their affordable product prices (<IDR10k for small-mid size). We assess that CMRY's market share will remain relatively solid due to its top-of-mind products, while ULTJ will face increasing competition in the industry.
▪ We give a Neutral outlook for the consumer sector. We anticipate a decline in mid-low purchasing power due to potential increases in staple prices. Our top pick is ICBP, which stands to benefit from the political year. Upside risks include: 1) faster-than-expected decline in food staple prices; 2) improved purchasing power; 3) higher-than-anticipated election disbursements.
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