ICBP : Better Revenue Growth Potential

03 Jun 2024 Valdy

ICBP recorded net revenue of IDR19.92 trillion during 3M24, a limited growth of 4.07%. Although ICBP’s revenue growth was limited, ICBP was able to record an Operating Profit Margin of 24.69% during 3M24.

Pinehill Company Ltd. (PCL) revenue was overshadowed by high inflation rate in some of its operating regions. During 2023, PCL recorded revenue of IDR16.4 trillion, growing 10.92% YoY. This growth was lower than the sales growth in 2022, which reached 19.79% YoY. However, ICBP could still post a solid Operating Profit Margin in 2023 at 21.19%. Better than the Operating Profit Margin in 2022, which amounted to 20.65%.

The acquisition of Pinehill Company Ltd. (PCL) in 2020 also contributed to ICBP’s revenue growth. Based on data from the World Instant Noodles Association (WINA), demand for instant noodles in PCL’s operating regions tends to increase from 2019-2023 such as Nigeria (CAGR +9.19%), Egypt (CAGR +30.99%), Turkey (CAGR +29.08%), and Kenya (CAGR +21.67%). We believe it will positively impact for ICBP’s revenue due to PCL’s strong market share in the region.

Profit margins have the potential to stabilize in line with the softening of raw material prices. If CPO and Wheat prices stabilize more in the future, it will potentially boost the company’s profit margin stability.

Using the Discounted Cash Flow method with a Required Return of 7.49% and Terminal Growth of 2%, we estimate ICBP’s fair value at IDR12,504 per share (Expected PE at 14.91x and EV/EBITDA at 9.28x in FY24). We give ICBP a Buy rating with a potential upside of 28.25%.

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