Company Update / Consumer Staples / IJ / Click here for full PDF version
Author(s): Lukito Supriadi ;Andrianto Saputra
- We expect to deliver net profit growth of +20% yoy in FY24F, among the strongest within staples (vs. staples aggregate of +9% yoy).
- Nonetheless, 's medium term outlooks from consumer health and nutritionals segments indicate structural growths deceleration.
- 's ROE needs to improve to drive the stock's valuation re-rating. For now, we maintain HOLD with TP of Rp1,620.
Strong FY24F earnings expectations; 1Q24 trend to sustain in 2Q24F
Among our consumer staples' coverage, we expect to deliver the strongest net profit growth of +19.9% yoy (vs. staples aggregates of +9.3% yoy). Apart from top/bottom line growth from low base effect, 's net profit growth is boosted by reversal of one-offs (Rp 111bn) in FY23.Further, our discussion with the company suggests similar trend of growth in 2Q24F from 1Q24's - characterized by strong unbranded generics pharma growth, decent domestic consumer health segment despite soft nutritionals & export.
Expect a far more normalized earnings growth beyond FY24F
Nonetheless, we further assess 's mid-term growth outlook from a segmental perspective. While growth from biologics and medical device are intact, the contributions to consolidated sales are still c.3/5%. Hence, we estimate FY24-26F net profit CAGR to register a more normalized growth of +9.7% as certain segments may face a structurally slower growth outlook.
Consumer health's growth impairment post universal healthcare
's consumer health segment previously recorded FY09-14 revenue CAGR of +11.1%. Post the implementation of national universal healthcare, consumer health which consists primarily of OTC medicines, booked a lower CAGR of +2.4% between FY15-23 (1.6% CAGR FY19-23). Going forward, would need health supplements and herbal products (Bejo Kurma, Slasi) within consumer health, to revive the mid-term growth outlook.
Nutritionals is also lacking significant growth drivers
Morinaga growing up milk powder is estimated to contribute to c.60% of nutritional's segment revenue. One growth driver for growing up milk powder is birth rate (per 1k population). It's on a consistent decline of -2.1% CAGR in the past 10 years since FY12. On the price side of the revenue equation, the preference for value products (i.e. down trading trend) further implies that milk powder category's growth outlook is indeed quite muted.
ROE needs to improve to drive 's re-rating; Maintain HOLD
In addition to the challenging mid-term growth outlook, 's ROE has declined significantly from FY14's 23.7% to FY23's 12.2%. Given FY23's low earnings base, we expect ROE to improve in FY24F to 13.2% but ROE needs to further improve to justify the re-rating thesis. Reiterate HOLD .
Sumber : IPS