Revenue outperforms

We expect Indofood CBP to record mid-teens revenue growth in 2Q26F, beating market expectations, on the back of: 1) the strong demand in Pinehill (unlisted, a subsidiary of ICBP) region post-Ramadhan – Pinehill also gains market share underpinned by manufacturing proximity and extensive distribution network, supporting the company in sustaining product availability, while its competitors (mostly imported products) are facing difficulty in entering the market amid the Middle East war; 2) demand from the free meal program should boost ICBP’s liquid milk sales; and 3) low base effect given the government’s expenditure cut last year. Note that growth in 1H was mostly driven by volume. In 2H26F, we continue to believe Pinehill will be the main growth driver, while the free meal program would strengthen Indonesia’s consumption, especially toward liquid milk products despite the budget cut. We believe that in order to fulfil dairy consumption demand, products for free meal kitchens should be procured from existing manufacturers. On top of that, we believe 2H should deliver higher sales due to earlier stocking activities in 4Q in anticipation of an early 2027 Lebaran season.

Volume over margin strategy

Despite rising material costs, year-to-date 2026 ICBP has not taken meaningful price hikes. Historically, ICBP has consistently increased selling prices by 3-4% per year, especially for the instant noodles category. We believe ICBP should prioritize its sales volume and ensure its pricing remain relevant with current consumers’ soft buying power. Indonesia FMCG players, including ICBP, have raised selling prices in double-digits in the past three years (since the Ukraine war in 2022), while consumers’ purchasing power has lagged the pace of inflation. Therefore, the company prefers to maintain its affordability to have more sustainable sales volume as well as earnings growth. On a more positive note, Pinehill has higher pricing power to pass on the costs, given its higher buying power level in the Middle East.

Maintain our Buy call

We believe ICBP’s strong revenue growth will likely drive core earnings growth despite margin pressure, and ICBP’s core earnings will likely beat consensus estimates. In terms of USD debt issue, we believe the strong Pinehill cash flow generation should be more than enough to cover the interest and loan payback, backed by faster sales volume growth and thicker margin level. We maintain our Buy rating with TP of IDR14,500, which is based on our target FY26F P/E of 18x. The stock currently trades at 7.4x FY26F. Downside risks would be higher-than-expected USD-related costs to disrupt earnings.

Fig. 1: ICBP – Revenue growth forecasts

 

Fig. 2: ICBP – Estimated gross margin trend

 

Fig. 3: Indonesia free meal program progress

 

Fig. 4: ICBP – P/E band

 

Fig. 5: ICBP – Ownership structure

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)

Jody Wijaya (jody.wijaya@verdhana.id)

Nayla Yasmin (nayla.yasmin@verdhana.id)