ICBP - Weak purchasing power, ICBP's profit soars in 1H25

ICBP - Weak purchasing power, ICBP's profit soars in 1H25 PT Indofood CBP Sukses Makmur Tbk. (ICBP) recorded a net profit attributable to the parent entity amounting to Rp5.54 trillion throughout the first semester of 2025. This realization surged by 56.5% year on year (yoy) from Rp 3.54 trillion in the same period last year. Detailing the financial report ending on the period of June 30, 2025, net sales were recorded at Rp37.60 trillion, a slight increase of 1.73% year on year (yoy). The cost of goods sold also rose by 6.52% yoy to Rp24.48 trillion. As a result, the gross profit decreased by 6.12% year-on-year to Rp13.12 trillion. From the balance sheet perspective, ICBP's total assets as of June 30, 2025, increased to Rp 132 trillion from Rp 126 trillion at the end of December 2024. Liabilities also rose to Rp 62.5 trillion, while equity increased to Rp 69.5 trillion. Comment: ICBP's impressive 56.5% profit jump in the first half of 2025 mainly driven by a sharp drop in net loss on foreign exchange difference from financing activities. This suggests that while the company faced challenges with sales and the cost of goods, strategic financial and operational efficiencies were the key to its strong profitability. Looking ahead, we anticipate a more favorable operating environment for ICBP in the second half of 2025. We project no significant surge in input costs, which should alleviate the pressure on gross margins seen in the first half. Coupled with the expectation of slightly better volume growth, a more stable cost structure could enable ICBP to translate top-line performance into even stronger profitability. The company's demonstrated ability to manage its financial risks positions it well to capitalize on any improvements in consumer sentiment and economic conditions. Maintain BUY. Our blended TP of IDR13,990 implies 20.6x ‘25F P/E, while it is currently trading at 16.5x ‘25F P/E, or slightly below its -1SD of 16.6x ‘25F P/E.