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Glimpse of Better 2Q24 Earnings Outlook

Bread is becoming increasingly important in busy and advanced societies due to its convenience, versatility, and nutritional value. As lifestyles become more fast-paced, people seek quick, easy-to-prepare meal options, and bread fits this need perfectly. It can be easily incorporated into a variety of meals, from breakfast toast and sandwiches to quick snacks, making it a staple in many households.

Additionally, bread is available in numerous varieties, including whole grain and fortified options, which cater to health-conscious consumers seeking balanced nutrition. Thus, its adaptability and convenience make bread a vital part of modern diets. For that thesis, the number one proxy is certainly is no other than ROTI IJ.

ROTI's top-line performance is anticipated to improve in 2Q24, driven by a recovery in sales volume and a normalization of the return rate. The company reported a low teens YoY growth in May 2024, with sales growth entirely volume-driven as no price increases were implemented. Additionally, the company projects that the return rate will normalize to 12-13% in 2Q24.

Source: Company, Sucor Research

In May 2024, ROTI and PT Mata Kencana Abadi formed a joint venture, PT Javasari Mitra Prima (JMP), to enhance performance and capitalize on opportunities in the B2B segment. This collaboration aims to leverage ROTI’s extensive distribution and logistics capabilities.

Sourcr: Company, Sucor Research

Earnings are estimated to reach IDR359bn in 2024 and IDR408bn in 2025, reflecting annual growth of +7.7% and +13.8%, respectively. These gains are expected to be driven by a recovery in sales volume and margin improvements due to softening input costs.

Source: Company, Sucor Research

Therefore, we maintain a BUY rating with a target price of IDR1,410, implying a 24.3x 2024F PE.


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