Refer to Important disclosures on the last of this report

  O ^{c t- 1 7} _N ^{o v -1 7} _D ^{e c -1 7 J a n -1 8 J a n -1 8} _F ^{e b -1 8} _M ^{a r- 1 8} _M ^{a r- 1 8 A p r- 1 8} _M ^{a y -1 8} _M ^{a y -1 8 J u n -1 8 J u l- 1 8 J u l- 1 8} _A ^{u g -1 8} _S ^{e p -1 8 O c t- 1 8 O c t- 1 8} ICBP-Rebase JCI Index-Rebase

• 80bps qoq to 17% in 3Q17 (vs. 2Q18: 16.2%; 3Q17: 15.4%), driven by margin expansion in the noodle, dairy and food seasonings segments. With less competition in the noodle segment, we believe that the company will be able to sustain their EBIT margin at the current level.

  7.9 Net Gearing (%) (34.2) (31.7) (40.3) (47.5) (52.2) PER (x)

  12.0

  13.0

  5.6

  20.1

  3.6 Net Profit (RpBn) 3,598 3,796 4,290 4,805 5,183 EPS (Rp) 309 326 368 412 445 EPS Growth (%)

  3.3

  7.8

  12.2

  27.2

  Revenue (RpBn) 34,466 35,607 38,882 42,602 46,782 EBITDA (RpBn) 5,838 6,553 6,771 7,298 7,562 EBITDA Growth (%)

  Year To 31 Dec 2016A 2017A 2018F 2019F 2020F

  01 November 2018 Results Note BUY (Unchanged)

  Indofood CBP (ICBP IJ)

  28.9

  24.2

  27.4

  16.9

  95 100 105 110 115

  90

  E q u it y | I n d o n e s ia | C o n s u m e r S ta p le s

  15.7 Source : ICBP,IndoPremier Share Price Closing as of : 31-October-2018

  15.9

  16.7

  18.9

  21.6

  3.7 Dividend Yield (%) (1.5) (1.9) (1.8) (2.1) (2.3) EV/EBITDA (x)

  4.1

  4.6

  5.1

  5.6

  20.1 PBV (x)

  9M18. We reiterate our BUY call for ICBP and rolling forward our valuation to FY19F with a higher TP of Rp10,350 (based on target P/E of 25x). We transfer coverage from Putri Tobing to Elbert Setiadharma.

  Valuation.We maintain our revenue forecast for FY18F and FY19F, while slightly raising our earnings forecast by 1.9%/1.5% following improvements in margin in

  Margin expansion drove earnings growth. Gross margin in 3Q18 continued to improve by +80bps qoq to 33% (vs. 2Q18: 32.2%; 3Q17: 31.5%), mainly on the back of a more muted commodity growth in 9M18. EBIT margin also improved by

  4.1 Relative to JCI (%)

  StockData

  Target price (Rp) Rp10,350

  Prior TP (Rp) Rp10,160

  Shareprice (Rp) Rp8,925

  Upside/downside (%) +16.0

  Sharesoutstanding (m) 11,644 Marketcap. (US$ m) 6,836 Free float (%)

  19.5 Avg. 6m dailyT/O (US$ m)

  2.0 Price Performance

  3M

  6M

  12M

  Absolute (%)

  1.7

  8.8

  4.6

  1Q17: 10.8%). Meanwhile, ICBP has been able to maintain their market share dominance at 86.3%, through their Indomie, Sarimi and Supermi brands. This was also confirmed through our on-the-ground checks, where retailers and consumers were saying that Indofood has had better advertising and innovative products to attract consumers. Although volume growth in the industry has been shrinking, without new innovations and aggressive marketing from Wings’, we believe that ICBP can still gain more market share in the segment.

  1.4

  Regaining dominance in noodle segment.In 3Q18, the noodle segment alone grew by +13% yoy(vs. 2Q18: +7.2%yoy; 3Q17: +8.3%yoy), the strongest growth in the past 3 years. We believe that this can be contributed to both improvement in market share and slight increase in ASP, as industry volume continued to decline by -5% yoy in 9M18. Wings’ market share in the segment, through their Mie Sedaap brand, has also declined to 10.2% as of 1Q18 (vs.

  Robust 3Q18 earning, exceeding expectations.ICBP recorded net earnings of Rp1.2tn in 3Q18 (+36% yoy; +11% qoq) and Rp3.6tn cumulatively in 9M18 (+16% yoy), forming 84% and 85% of ours and consensus respectively. This is mainly on the back of improvement in market share and margin expansion. Top line also booked a moderate growth, recording Rp10tn in 3Q18 (+12% yoy; +5% qoq) and Rp29.5tn in 9M18 (+7% yoy). We continue to like ICBP on the back of strong 9M18 earnings and improvement in market share driven by new innovative products.

  Robust earnings growth Strong 3Q18 result, above expectations. Regaining market share dominance in noodle segment. Further margin expansion across the board. Maintain BUY on ICBP with higher TP of Rp10,350.

  PT Indo Premier Sekuritas elbert.setiadharma@ipc.co.id

  Elbert Setiadharma

  4.5 Source: Bloomberg

  1.5 Vs. Consensus (%)

  8.2

  1.9

  Latest EPS (Rp) 368 412 Vs. Prior EPS (%)

  Estimate Change; Vs. Consensus 2018F 2019F

  Indofood SM 80.5%

  Major Shareholders

  7.9 52whigh/low (Rp) 9,275 - 8,000

• 62 21 5793 1169

  Fig. 1: ICBP quarterly sales trend Fig. 2: EBIT and EBIT margin trend Source: Company, IndoPremier Source: Company, IndoPremier

  Fig. 3: Noodle growth trend Fig. 4: 3Q18 sales breakdown Source: Company, IndoPremier Source: Company, IndoPremier

  Fig. 5: 1Q18 instant noodle market share Fig. 6: 2018 new line extensions Source: Top Brand, IndoPremier Source: Company ^{-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% - 2,000 4,000 6,000 8,000 10,000 12,000 3 Q 1 6 4 Q 1 6 1 Q 1 7 2 Q 1 7 3 Q 1 7 4 Q 1 7 1 Q 1 8 2 Q 1 8 3 Q 1 8 Sales (Rp Bn; LHS) Sales YOY Growth (%; RHS) 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 1,000 2,000 3,000 4,000 5,000 6,000 2014 2015 2016 2017 2018F 2019F EBIT (Rp Bn; LHS) EBIT Margin (%; RHS) 19,916 20,996 22,540 23,107 24,993 27,110 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 2014 2015 2016 2017 2018F 2019F Noodle (Rp Bn) Noodle YOY Growth (%; RHS) Noodles 64% Dairy 20% Snack Foods 6% Food Seasonings 3% Nutrition and Special Foods 2% Beverages 5%}

  ICBP (Indomie) 78% Wings Group (Mie Sedap)

  10%

  ICBP (Sarimi) 4%

  ICBP (Supermi) 4% Others 4%

  Fig. 7: Earnings Revision FY18F FY19F (RpBn) old new (%) old new (%)

  Net sales 38,882 38,882 0.0% 42,602 42,602 0.0%

  COGS 26,828 26,634 -0.7% 29,608 29,395 -0.7%

  Gross profit 12,053 12,248 1.6% 12,994 13,207 1.6%

  Operating cost 6,232 6,306 1.2% 6,682 6,790 1.6%

  Operating profit 5821 5,941 2.1% 6,311 6,416 1.7%

  Other 45 45 0.0% -206 -206 0.0%

  Tax 1444 1,474 2.1% 1,629 1,655 1.6%

  Net profit 4209 4,290 1.9% 4,734 4,805 1.5% EPS

  361 368 1.9% 406 412 1.5%

  Margins (%)

  GPM 31.0% 31.5% 30.5% 31.0%

  OPM 15.0% 15.3% 14.8% 15.1%

  NPM 10.8% 11.0% 11.1% 11.3%

  Source: Company, IndoPremier Fig. 8: Results Summary (IDR Bn)

  3Q17

  2Q18

  3Q18 % QoQ % YoY

  9M17

  9M18 % YoY vs. cons vs. ours

Net Sales 8,970 9,579 10,019 5% 12% 27,430 29,478 7% 76% 76%

  COGS 6,144 6,494 6,717 3% 9% 18,799 19,887 6%

  

Gross Profit 2,826 3,084 3,302 7% 17% 8,632 9,591 11% 79% 80%

  Operating Cost 1,446 1,530 1,598 4% 10% 4,473 4,617 3%

  

Operating Profit 1,380 1,555 1,704 -10% 24% 4,159 4,974 20% 88% 85%

  Other

  20

  3 21 612% 5% 83 (27) -132% Tax 486 446 487 9% 0% 1,182 1,393 18%

  

Net Profit 914 1,112 1,239 11% 36% 3,060 3,554 16% 85% 84%

  Gross Margin (%) 31.5% 32.2% 33.0% 31.5% 32.5% Oper. Margin (%) 15.4% 16.2% 17.0% 15.2% 16.9% Net Margin (%) 10.2% 11.6% 12.4% 11.2% 12.1%

  Source: Company, IndoPremier

  Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement

  Net Revenue 34,466 35,607 38,882 42,602 46,782 Cost of Sales (23,606) (24,548) (26,634) (29,395) (32,747) Gross Profit 10,860 11,059 12,248 13,207 14,034 SG&A Expenses (5,924) (5,681) (6,306) (6,790) (7,406) Operating Profit 4,936 5,378 5,941 6,416 6,628 Net Interest 324 250 340 536 751 Forex Gain (Loss) Others-Net (273) (422) (385) (330) (250) Pre-Tax Income 4,987 5,206 5,897 6,622 7,130 Income Tax (1,358) (1,663) (1,474) (1,655) (1,782) Minorities (31) 253 (133) (161) (164) Net Income 3,598 3,796 4,290 4,805 5,183

  Balance Sheet

  8,372 8,945 10,433 13,159 15,672 Cash & Equivalent

  3,720 3,871 3,888 4,260 4,678 Receivable

  3,110 3,262 3,329 3,674 4,093 Inventory 369 501 449 475 505 Other Current Assets

  15,571 16,579 18,099 21,569 24,948 Total Current Assets

  7,114 8,120 8,350 8,527 8,652 Fixed Assets - Net

  1,424 1,424 1,424 1,424 1,424 Goodwill

  3,160 2,851 2,943 2,443 2,334 Non Current Assets

  28,901 31,619 32,448 35,595 38,990 Total Assets 563 1,148 567 563 563 ST Loans

  2,692 2,904 2,940 3,275 Payable

  2,611 2,525 2,770 3,057 3,406 Other Payables 604 250 234 233

  91 Current Portion of LT Loans 6,470 6,827 6,234 6,793 7,334 Total Current Liab.

  877 954 506 273 182 Long Term Loans

  3,054 3,513 3,055 3,055 3,055 Other LT Liab. 10,401 11,294 9,795 10,121 10,571

  Total Liabilities 6,585 6,765 6,568 6,568 6,568

  Equity 10,979 12,799 15,191 17,851 20,632

  Retained Earnings 936 760 893 1,054 1,218 Minority Interest

  18,500 20,324 22,652 25,473 28,418 Total SHE + Minority Int. Total Liabilities & Equity 28,901 31,618 32,447 35,594 38,989

  Source : ICBP,IndoPremier

  Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Cash Flow

  3,629 3,543 4,423 4,966 5,347 Net Income (Excl.Extraordinary&Min.Int) 510 623 720 773 825 Depr. & Amortization

  (333) (402) (1) (278) (302) Changes in Working Capital

  (305) 80 (380) (723) (817) Others

  3,501 3,843 4,762 4,738 5,053 Cash Flow From Operating

  (728) (1,320) (1,042) (450) (841) Capital Expenditure 89 (757) 1,644 640 828 Others

  (639) (2,077) 602 190 (13) Cash Flow From Investing

  (824) 308 (1,046) (238) (233) Loans Equity

  1,545 1,942 1,898 2,145 2,403 Dividends 119 309 (665)

  57

  87 Others 840 2,559 188 1,964 2,257 Cash Flow From Financing

  3,702 4,325 5,551 6,892 7,297 Changes in Cash

  FinancialRatios

  31.5

  31.1

  31.5

  31.0

  30.0 Gross Margin (%)

  14.3

  15.1

  15.3

  15.1

  14.2 Operating Margin (%)

  14.5

  14.6

  15.2

  15.5

  15.2 Pre-Tax Margin (%)

  10.4

  10.7

  11.0

  11.3

  11.1 Net Margin (%)

  13.0

  12.5

  13.4

  14.1

  13.9 ROA (%)

  20.6

  19.6

  20.0

  20.0

  19.2 ROE (%)

  21.6

  20.2

  21.2

  22.4

  22.5 ROIC (%)

  36.6

  38.9

  36.4

  34.9

  34.9 Acct. Receivables TO (days)

  0.0

  0.0

  0.0

  0.0

  0.0 Acct. Receivables - Other TO (days)

  8.3

  7.7

  8.1

  8.4

  8.4 Inventory TO (days)

  37.7

  41.6

  38.1

  34.8

  34.6 Payable TO (days)

  0.0

  0.0

  0.0

  0.0

  0.0 Acct. Payables - Other TO (days)

  11.0

  11.6

  5.8

  4.2

  2.9 Debt to Equity (%)

  0.0

  0.0

  0.0

  0.0

  0.0 Interest Coverage Ratio (x) (34.2) (31.7) (40.3) (47.5) (52.2)

  Net Gearing (%)

  Source : ICBP,IndoPremier

  Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta 10210 - Indonesia p +62.21.5793.1168 f +62.21.5793.1167

INVESTMENT RATINGS

  BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION.

  The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

  DISCLAIMERS

  This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Securities or its affiliates may seek or will seek investment banking or other business relationships with the companies in this