INDF Fast Moving Consumer Goods

INDF Fast Moving Consumer Goods. The rapid growth in sales of brand consumer products and the increase in the selling price of crude palm oil (CPO). It will encourage sustainable growth in the financial performance. Of Indofood Sukses Makmur Tbk (INDF IJ) this year. Meanwhile, sales of wheat flour through its subsidiary. Bogasari Flour Mills, are predict to tend to stagnate.

The company that produces fast moving consumer goods (FMCG). It shows a sales growth trend up to 2H20. Which is support by the desire of households to maintain household goods. Despite the turbulent economy. Indofood sees that this will have a positive impact on the sales of the company’s brand products. Through its subsidiary, Indofood CBP Sukses Makmur Tbk (ICBP IJ), until the end of 2020.

• Indonesia Retail, Confident And Connected Retail Consumers
• Government Bond Performance 120 Bps Higher
• Bond Market Mixed amidst Bank Indonesia Meeting

Moreover, most of the company’s products have become market leaders in the country. Apart from these factors, Indofood Sukses Makmur will also benefit from a decrease in raw material prices. Which could boost profit margins. The company’s agribusiness will also reap profits in line with the increasing trend of CPO selling price. Which will support the company’s financial performance growth.

Meanwhile, the distribution business and Bogasari are expect to weaken until the end of this year. This is influence by the decrease in the volume of goods distribute. The decline in sales of flour will also occur due to lower market demand. Meanwhile, the catalyst for INDF’s share price movement comes from the progress of the acquisition of Pinehill Company Ltd by Indofood CBP.

Fast Moving Consumer Goods Expectation

The price target is also considering the company’s upward revision of the company’s financial performance target this year. The estimate net profit was revise up from IDR 5.1 trillion to IDR 5.48 trillion. The upward revision is in line with lower costs which impact on expectations of an increase in the company’s net profit margin (net margin) from 6.2% to 6.9%.

As well as, the sales target for 2020 was revise down from IDR 82.55 trillion to IDR 79.01 trillion. Regarding the realization of Indofood’s financial performance during 1H20, the company was support by the solid sales growth of Indofood CBP. Likewise with the agribusiness line which record rapid growth in line with the increase in the selling price of CPO.

Bogasari still shows weak performance due to lower selling price of wheat flour, which has an impact on lower profit margins. Overall, Indofood’s realize revenue and net profit up to 1H20 have exceed estimates. Revenue is equivalent to 52% of this year’s target and net profit is equivalent to 54% of the forecast.

Meanwhile, the realization of Indofood’s financial performance during 1H20 met analyst expectations and consensus. The supporting factors for the company’s high net profit come from the increase in net profit margins and positive support from the agribusiness line. Realization of the company’s financial performance of Fast Moving Consumer Goods products grew better than its sector during 1H20.

Bogasari Fast Moving Consumer Goods

Bogasari’s sales growth only reach 3.5% with a lower profit margin due to the increase in raw material purchase prices and lower demand from the small and medium business segment after being affect by the Covid-19 pandemic. Indofood Sukses Makmur post an increase in net profit from IDR 2.54 trillion in 1H19 to IDR 2.84 trillion in 1H20.

Sales increase 2% from IDR 38.61 trillion to IDR 39.38 trillion. The high increase in net profit was in line with the increase in net profit margin from 6.6% to 7.2%. Compare to other consumer goods stocks, INDF shares are classify as the most attractive and the price is still discount.

Indofood is a producer of instant noodles and wheat flour with the largest market share in Indonesia. This market strength is an add value for the company to maintain the long-term growth trend in financial performance. Previously, the company’s subsidiary, Indofood CBP, had obtain shareholder approval regarding the plan acquisition of Pinehill Company Ltd worth USD 2.99 billion.

This indicates that all the initial requirements of the transaction plan have been met. Approval was won by Indofood CBP through the Extraordinary General Meeting of Shareholders (EGMS) which took place on 3 August 2020.