1Q18 Performance: Healthy Financial Performance and Maintained Margin
ICBP recorded a good performance with revenue in 1Q18 increasing by 4.47% YoY to IDR 9,88 trillion in 1Q18 and also maintained its operational performance by holding their operating margin at 17.36% (vs 16.03% in 1Q17). This condition is in line with our expectation, which represent 25.36% of the MNCS estimate. The growth of revenue supported by Noodles and Nutrition & Special foods segment with growth of 7.10% YoY and 20.46% YoY respectively with each contribution of 66.34% and 2.12% of total sales. EBITDA grew 10.57% YoY to IDR 1,87 trillion and net profit grew 11.10% YoY to IDR 1,12 trillion which each reflect to 29.67% and 29.09% of MNCS estimate.
Maintain Its Market Share by Supporting National Team in Asian Games 2018
In 1Q18, Indomie brand still occupies the top six in instant noodle trade in Asia Pacific. Indomie's sales for the worldwide also showed a significant growth of 10.45% YoY on FY17 (vs -3.71% on FY16). Also, ICBP’s Indomie and Pop Mie can be found on the Indonesian Top Brand Index Number 1 in 1Q18 as the most top brand. In the term to build more brand awareness for both domestic and overseas, ICBP together with PT Indofood Sukses Makmur Tbk (INDF), initiated “Satukan Tekad dan Semangat Indonesia” movement by becoming the official partner of Asian Games 2018 which will take place on 18 August 2018 until 2 September 2018 in Jakarta and Palembang.
Fierce Competition and Raw Material Price to be Considered
The competition map in the instant noodle segment is getting tighter amidst the stagnant economy. Other things to note are fluctuations in the USD/IDR rate that could potentially increase costs in raw material purchases as well as fluctuations in commodity for ICBP’s main ingredients.
BUY Recommendation with TP: IDR 9,100
We recommend BUY for ICBP with TP: IDR 9,100, which implies PE/PBV of 25.45x/4.91xon FY18E and PE/PBV of 22.81x/4.44x on FY19F.We believe that high demand for noodles and as the biggest holder of brand share will maintain ICBP’s growth in the future. Also, the changing of Indonesian society’s consumption pattern into healthy food will bring a new opportunity for ICBP. ICBP is currently trading at a level of –1 STD (average 3-years PE) with PE of 25.53x.
