Overview of Indonesia’s Consumer Sector

Maybank IBG Research provides a deep dive into Indonesia’s consumer sector amidst macroeconomic changes, such as the 2025 VAT increase. The report evaluates the performance and outlook of key players in the industry, offering actionable recommendations for investors. The sector is expected to see varied earnings growth trajectories, with companies adopting initiatives to enhance profitability and mitigate competition risks. The report maintains a NEUTRAL sector view, with Top BUY recommendations for Mayora Indah (MYOR), Indofood CBP (ICBP), and Mitra Adiperkasa (MAPI), while Top SELL recommendations are flagged for Gudang Garam (GGRM), Matahari Department Store (LPPF), and Unilever Indonesia (UNVR).

Key Insights into the Companies Covered

1. Mayora Indah (MYOR)

Recommendation: BUY

Current Price (CP): IDR 2,680

Target Price (TP): IDR 3,500

Upside Potential: 31%

Mayora Indah is highlighted as one of the top picks in the consumer staples sector. The company is expected to deliver robust earnings growth of 20.5% in FY25E, following a modest 5.3% growth forecast for FY24E. With its high ROAE of 21.9% and an attractive FY25E PER of 14.8x, valuations are deemed favorable. Investors are also enticed by its dividend yield, which is forecasted to grow from 2.2% in FY24E to 2.7% in FY25E. Despite sector challenges, Mayora’s strategic initiatives and competitive positioning make it a standout performer within the industry.

2. Indofood CBP (ICBP)

Recommendation: BUY

Current Price (CP): IDR 11,175

Target Price (TP): IDR 14,000

Upside Potential: 25%

As a leading consumer staples company, Indofood CBP is projected to achieve consistent earnings growth of 10.6% in FY25E after an 8.2% rise in FY24E. With a strong ROAE of 20.8%, it demonstrates resilience in a competitive landscape. Its FY25E PER of 11.3x and dividend yield of 4.2% further bolster its investment appeal. Indofood CBP’s robust fundamentals and strategic market positioning make it a reliable choice for long-term investors.

3. Mitra Adiperkasa (MAPI)

Recommendation: BUY

Current Price (CP): IDR 1,360

Target Price (TP): IDR 2,000

Upside Potential: 47%

Mitra Adiperkasa stands out as the top pick among retailers, despite a projected earnings decline of 5.0% in FY24E, followed by a recovery of 9.8% in FY25E. Its ROAE is forecasted to improve to 15.9% in FY25E, supported by a favorable FY25E PER of 11.5x. The company’s dividend yield is also expected to rise slightly to 1.8% in FY25E. Mitra Adiperkasa’s focus on strategic growth initiatives positions it as a compelling investment opportunity with significant upside potential.

4. Gudang Garam (GGRM)

Recommendation: SELL

Current Price (CP): IDR 12,775

Target Price (TP): IDR 8,000

Downside Potential: -37%

Gudang Garam is flagged as a Top SELL due to its challenging outlook. Earnings are expected to plummet by 77.7% in FY24E, with only an 18.7% recovery forecasted in FY25E. The company’s ROAE remains low at 2.2% in FY25E, and its FY25E PER of 17.5x is unattractive compared to peers. Although its dividend yield is expected to rise to 3.9% in FY25E, the overall investment case is weakened by persistent headwinds in the cigarette sector, including regulatory pressures and rising input costs.

5. Matahari Department Store (LPPF)

Recommendation: SELL

Current Price (CP): IDR 1,435

Target Price (TP): IDR 1,150

Downside Potential: -20%

Matahari Department Store faces a challenging retail environment. Despite a forecasted earnings growth of 23.4% in FY24E, this is expected to slow to 6.8% in FY25E. The company’s ROAE remains strong at 66.0% in FY25E, but its FY25E PER of 3.6x reflects concerns about sustainability. While the dividend yield is expected to grow to 3.9% in FY25E, the overall outlook remains bearish due to weak fundamentals and competitive pressures in the retail sector.

6. Unilever Indonesia (UNVR)

Recommendation: SELL

Current Price (CP): IDR 1,745

Target Price (TP): IDR 1,400

Downside Potential: -20%

Unilever Indonesia continues to face headwinds, with earnings expected to decline by 25.2% in FY24E, followed by a modest growth of 1.7% in FY25E. Its ROAE of 108.0% in FY25E and dividend yield of 5.5% offer some positives, but its FY25E PER of 18.2x is considered expensive. Unilever’s challenges in maintaining market share amidst rising competition and regulatory changes contribute to its SELL recommendation.

Sector Outlook and Risks

The report underscores that the 2025 VAT hike to 12% is not expected to materially impact consumer staples, as essentials remain VAT-exempt. However, short-term sales pressure is anticipated in Q1 2025 due to price adjustments and inventory buildup in Q4 2024. The consumer sector’s FY25 earnings growth is forecasted at 12.3% YoY, led by consumer staples (9.6% growth), cigarettes (23.1%), and retailers (16.4%).

Downside risks include the imposition of a sugar tax, persistent increases in input costs, and the emergence of predatory competitors. On the upside, potential IDR appreciation and moderation in commodity prices could support sector recovery.

Conclusion

Maybank IBG Research provides a balanced perspective on Indonesia’s consumer sector, highlighting opportunities in MYOR, ICBP, and MAPI while cautioning against investments in GGRM, LPPF, and UNVR. As the sector grapples with regulatory changes and competitive pressures, selective investments in high-growth companies with strong fundamentals are recommended. The report serves as a valuable guide for investors navigating the evolving landscape of Indonesia’s consumer sector.