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Premium Brand with a Premium Growth

How time flies! Now we have gone through more than half of Ramadhan and is about to welcome Eid al-Fitr in two weeks. Fun fact, a research on brain science showed a neurological reason why we felt that time moves at a faster pace when we’re having a good time. It’s said that a study showed that our brain will produce more dopamine when we are happy, which makes our internal clock to slow down and create the effect that time moves faster.

During Eid al-Fitr, it's not a secret anymore as to why domestic consumption surge higher than average considering the payment of holiday allowance which led to shopping spree tradition.

Mandiri Spending Index

Source: Bank Mandiri, CNBC

We see that this seasonality benefit some sectors, such as consumer sector. When people travel for homecoming on Eid al-Fitr, they usually bought foods and other goods to be brought along to their hometown, boosting the general domestic spending. Where we see the opportunity is that this habit of buying extra foods actually had happened since the fasting, where hungry consumer watch tv ads as they wait for Iftar. In our view, this Momentum can be utilized by going long on CMRY.

CMRY is arguably one of the best consumer stock in terms of potential growth. Even though many say its valuation is somewhat expensive, but for me personally, the current valuation of CMRY is in line with the company's performance and future growth which, to be honest, is unbeatable among other FMCG companies (It’s like BBCA of FMCG companies!)

Source: Company, Sucor Sekuritas research

We expect CMRY to continue delivering strong earnings growth of 18.2% and 18.8% YoY for 2024-25F, respectively. We are confident with CMRY's future growth as we see its exquisite historical performance, proved once more on 4Q23. On 4Q23, Consumer food delivered stellar growth of +45% YoY while dairy segment continues to outperform the industry despite weakening consumer purchasing power.

CMRY posted net profit of IDR275bn (+51% YoY) on 4Q23, mainly driven by strong top line growth which boosted its FY23 earnings to reach IDR1.24tn (+17% YoY). We project CMRY's topline to grow to IDR1.47tn by the end of 2024, mainly driven by higher sales volume while margin is likely to experience slight expansion following lower input costs.

Aside from its solid 4Q23 result which proves that their business model is working really well, we also conducted some ground check to see its price positioning among peers. The ground check concludes that from two stores sample, CMRY's consumer food price as a "premium brand" image is still competitive. This study brought our confidence even higher because we see that it is feasible that CMRY's market share will hike due to similar ticket size for its product.

We continue to like Cimory for being one of the fastest growing fmcg company in Indonesia with robust 23% earnings cagr (2023F-28F) with healthy ROIC of above 17% over the period. We also see that CMRY can continuously create an excellent innovation which allows the company to grow bigger, not to mention their highly efficient business which can disrupt existing categories. We put a buy call for CMRY with DCF-based TP of IDR 5,190 which implies 26x 12-month forward PE.


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