Indofood CBP Sukses Makmur Growing on Indonesia's Consumer Force

Janni Asman, analyst at Maybank Kim Eng Securities, sees Indofood CBP Sukses Makmur (Indofood CBP)'s revenue growing to IDR 35.1 trillion (approx. USD $2.7 billion) in 2016 from an estimated IDR 31.7 trillion (approx. USD $2.4 billion) in the preceding year. Meanwhile, net profit is estimated to rise to IDR 3.6 trillion (approx. USD $273 million) from an estimated IDR 3.2 trillion in 2015 over the same period.

Growth is supported by the launch of several new products. These include Chitato Mi Goreng (potato chips) and Indomie Goreng Rasa Kuah (an instant noodle). Both products were warmly welcomed by Indonesian consumers. This success was partly due to Indofood CBP's aggressive advertisement campaigning. Other positive developments for the company's financial performance are low commodity prices (flour and palm oil are key ingredients for the production process) and the strengthening rupiah exchange rate (against the US dollar). Maybank Kim Eng Securities puts the target price for Indofood CBP's shares at IDR 18,000. On Tuesday (22/03) the company's shares fell 2.06 percent to IDR 15,425. However, so far this year the company's shares have still gained 14.47 percent.

Stock Quote Indofood CBP Sukses Makmur - ICBP:

In order to maintain its growth momentum, the company set aside IDR 3.8 trillion for capital expenditures in 2016. This will be spent on enhancing production capacity at the company's factories. Indofood CBP targets to raise production volumes of instant noodles by 1-3 percent, processed milk products by 7-9 percent, snack foods by 8-10 percent, and drinks by 30-40 percent.

Ella Nusantoro, analyst at Credit Suisse Securities, is also positive about the future performance of Indofood CBP. Nusantoro says accelerated economic growth of Indonesia will give a boost to Indonesian consumer confidence and purchasing power. Also the central bank's interest rate cuts in the first three months of 2016 have managed to boost purchasing power in Indonesia. Bank Indonesia lowered its interest rates by a combined total of 75 basis points since the start of the year. The benchmark BI rate now stands at 6.75 percent. Credit Suisse expects to see the BI rate drop further to 6.50 or 6.25 percent this year.

Indofood CBP Sukses Makmur's Financial Highlights:

	2013	2014	2015F	2016F	2017F
Net Sales	25,094.7	30,022.5	31,711.0	35,065.0	38,917.0
Net Income	2,225.3	2,604.2	3,212.0	3,581.0	3,906.0
EBITDA	3,278.9	3,748.1	4,674.0	5,261.0	5,899.0
P/E Ratio (x)	35.81	30.03	28.1	25.2	22.8
P/BV (x)	6.12	5.47	5.6	5	4.5

^{in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
Source: Maybank Kim Eng Securities}

One of the Indofood CBP's strengths is that it can basically determine the price of the popular instant noodle packages in Indonesia. Indofood CBP controls a 66 percent market share. Although unhealthy, instant noodles have become a very popular meal (or snack) in Indonesia due to the cheap price, tasty flavors, and easy-to-prepare nature. Instant noodle brands such as Indomie (produced by the Indofood Group) and Mie Sedaap (produced by the Wings Group) have become household favorites across the nation. Both brands are among the top five brands of most purchased products by Indonesian households. Being the dominant market leader with the well-established Indomie brand, Indofood CBP can raise the price of instant noodles without losing too much of its market share. The expected growth of Indofood CBP's revenue and profit should partly come from higher instant noodle prices. The instant noodle division is estimated to account for about 85 percent of the company's operating income.

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