1Q25F FMCG sales grew despite low government expenditure and no more ‘political-year’ stimulus

We estimate that the FMCG firms under our coverage recorded average sales growth of +4% y-y in 1Q25F (vs. +9% in 1Q24). We consider the overall sales growth level as strong performance amid government budget efficiency in 1Q25, which is reflected in the lower government expenditure of -8% y-y (Fig. 3). Moreover, we consider the 1Q24 sales as a high base for FMCG sales, given the increased cash-handout activities during the presidential and parliament election campaigns. We believe the decent positive sales growth in 1Q25F was driven by the middle-income class’ downtrading trend, which encourages more consumption of low-ticket items, especially FMCGs. In addition, there has been more stimulus flowing to low-end consumers via agricultural incentives and free nutritious meal programs, thus triggering higher demand for affordable branded FMCGs.

Similar to 4Q24, FMCG companies with competitive pricing and strong general trade (GT) distribution tend to have stronger sales growth; for instance, Mayora Indah (MYOR IJ, Buy), Indofood CBP (ICBP IJ, Buy), Sariguna Primatirta (CLEO IJ, Buy), and Mulia Boga Raya (KEJU IJ, Neutral) (Fig. 1). In addition, companies such as MYOR and ICBP can enjoy strong contribution from overseas sales. Meanwhile, companies with a more premium product portfolio recorded weaker performance y-y, for example, Nippon Indosari Corpindo (ROTI IJ, Buy), Unilever Indonesia (UNVR IJ, Reduce), P&G Indonesia (unlisted), Frisian Flag (unlisted), Danone Indonesia (unlisted), and Nestle Indonesia (unlisted). We also notice that frozen food remains the fastest growing category, which is reflected in the double-digit sales growth for Kanzler products (Cisarua Mountain Dairy [CMRY IJ, Buy]). For healthcare related products, Kalbe Farma (KLBF IJ, Buy) may book mid-to-high single-digit sales growth, supported by consistent strong pharma sales coupled with the brand transformation of its consumer health division; on the other hand, Sidomuncul (SIDO IJ, Buy) is likely to book a sales decline, in our view.

1Q25F: shifting one week shipments

The Indonesia government issued mobility restrictions for truck deliveries starting from 24 March until 8 April during the Lebaran holiday. This resulted in some FMCG firms losing one week’s sales-in from the factory to distributors in 1Q25F, whereas last year, all the shipment restrictions were completed in 2Q24. This also implies that we may see stronger sales y-y in Apr-25 due to more working hours. In addition, we note the strong sales-out trend in the modern trade channel (MT), reflected in Alfamart (AMRT IJ, Buy) and Alfamidi’s (MIDI IJ, Buy) same-store-sales growth (SSSG) reaching 12% and 20% in March 2025, respectively, indicating potential strong restocking activities in April.

Our top picks

We maintain our thesis for our top picks:

MYOR remains our number one pick, supported by the following factors: 1) MYOR being a beneficiary of the middle-income class’ downtrading trend and improving low-end disposable incomes, 2) supported by a strong export market, 3) USD earnings, 4) margin recovery, 5) inexpensive valuation, and 6) significant buyback program acting as a buffer for the share price.

ICBP is our second top-pick on the back of: 1) pricing power, 2) beneficiary of downtrading trend, 3) strong overseas sales performance, 4) inexpensive valuation, and 5) ample liquidity.

CLEO is our third top-pick, led by: 1) continued market share gains, 2) pricing power, 3) urbanization-driven higher demand for packaged water, 4) accelerated distribution expansion outside Java, and 5) lower plastic costs y-y.

We also still like KLBF, due to: 1) its inexpensive valuation, 2) consistent strong pharma demand + brand transformation in consumer health, 3) lower USD costs exposure, 4) buyback program supporting share price, and 5) ample liquidity.

Lastly, we pick CMRY as well, given: 1) the robust consumption trend towards frozen/processed proteins and 2) consistent double-digit growth track record. Our overall pecking order among our preferred FMCG stocks would be MYOR > ICBP > CLEO > KLBF > CMRY > Indofood (INDF IJ, Buy) > Ultrajaya (ULTJ IJ, Buy) > SIDO > Multi Bintang (MLBI IJ, Buy) > ROTI.

Downside risks would be consumers’ weaker-than-expected buying power.

Fig. 1: FMCG firms' 1Q25F results preview

Fig. 2: Our covered FMCG firms’ sales y-y growth trend

Fig. 3: Government expenditure trend

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. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.

This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

RESTRICTIONS ON DISTRIBUTION

By accepting this report, the recipient hereof represents and warrants that you are entitled to receive such report in accordance with the restrictions and agrees to be bound by the limitations contained herein. Neither this report nor any copy hereof may be distributed except in compliance with applicable Indonesian capital market laws and regulations. 

Sandy Ham (sandy.ham@verdhana.id)

Jody Wijaya (jody.wijaya@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)