Indonesian Food Manufacturers in Focus: Indofood Sukses Makmur
Growth in the fast moving consumer goods sector will surely boost overall growth and the financial performance of Indofood Sukses Makmur, one of Indonesia's largest food manufacturing firms. Moreover, the stronger rupiah and lower costs of raw materials will also impact positively on the company's earnings. Indofood Sukses Makmur, part of the Salim Group, offers a wide variety of food and beverage products to Indonesian consumers ranging from instant noodles, dairy, snacks, food seasoning, and nutrition to special foods and beverages.
In the first half of 2016, net profit of Indofood Sukses Makmur climbed 29.4 percent (y/y) to IDR 2.23 trillion (approx. USD $169 million) from the same period one year earlier, while the company's sales grew 4.4 percent (y/y) to IDR 34.08 trillion over the same period. These positive figures were mainly the result of the positive performance of subsidiary Indofood CBP Sukses Makmur, the maker of the well-known Indomie instant noodles.
The positive performance of Indofood CBP Sukses Makmur managed to offset the negative impact of low palm oil prices on the corporate earnings of another subsidiary, agribusiness company Salim Ivomas Pratama. Earnings were also supported by stronger consumption of food and beverage products in Indonesia. According to recent data from Statistics Indonesia (BPS), production growth in the big and medium-sized food industry was recorded at 10.39 percent (m/m) or 5.17 percent (y/y) in the second quarter of 2016. This growth was possible amid improving purchasing power as well as rising consumer confidence in Indonesia in the first half of 2016. This gives rise to growing demand for food products.
Indonesian securities company Ciptadana Securities expects that subsidiary Indofood CBP Sukses Makmur will continue to boost earnings for the parent company, while the agribusiness units will remain under pressure.
Last year, Indofood announced that it plans to sell a stake in China Minzhong Food Corporation Limited (CMFC), a Singapore-listed Chinese integrated vegetable processing firm. This share sale should be completed this October and will generate fresh funds for Indofood that can be used to settle part of its foreign-denominated debt. This move will reduce the risk of foreign exchange losses in times of rupiah weakening.
Financial Highlights of Indofood Sukses Makmur:
| 2014 | 2015 | 2016F | 2017F | 2018F | |
| Net Sales | 63,594.5 | 64,061.9 | 70,193.0 | 76,708.0 | 84,383.0 |
| Net Income | 3,941.8 | 2,968.0 | 4,406.0 | 4,747.0 | 5,237.0 |
| P/E Ratio (x) | 15.1 | 17.4 | 16.0 | 14.9 | 13.5 |
| P/BV (x) |
2.82 | 2.59 | 2.46 | 2.26 | 2.07 |
in billion IDR rupiah, except stated otherwise
Source: CIMB Securities (28/08/2016)
Ciptadana Securities set its target price for shares of Indofood Sukses Makmur at IDR 9,950 per share, implying that it advises investors to purchase the company's shares. On Monday (29/08) shares of Indofood Sukses Makmur remained at IDR 7,925 a piece. So far this year, however, the company's shares have risen a whopping 53.14 percent.
Meanwhile, securities company CIMB Securities has recently revised its outlook for Indofood Sukses Makmur's corporate earnings due to the stronger rupiah (versus US dollar) so far in 2016, lower prices of raw materials and improved purchasing power in Indonesia. CIMB Securities set its target price for Indofood Sukses Makmur at IDR 9,000 per share.
Stock Quote Indofood Sukses Makmur - INDF: