Nomura Indonesia Consumer: Fighting for Relevance
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Nomura maintains a bullish outlook on the Indonesian consumer sector, forecasting that the multiplier effects of government priority projects—such as food security, free school meals, and village cooperatives—will strengthen. The consumer sector faces relatively low regulatory risk and remains highly predictable. Government spending will primarily target lower-tier cities and rural areas, effectively boosting disposable income for low-income demographics and driving consumption.
Nomura projects that EBIT growth for its covered companies will accelerate from 4.7% in FY25 to 14% in FY26. The overall valuation of these consumer stocks stands at roughly 13 times FY26 P/E, one standard deviation below the five-year average, offering a substantial margin of safety.
Stock selection leverages a Total Shareholder Return (TSR) framework focused on EPS growth potential, dividend payout capacity, and valuation. Top picks include Mayora Indah (MYOR IJ, Buy, IDR 4,200), favored for export-quality products and market share gains. Kalbe Farma (KLBF IJ, Buy, IDR 1,975) is highlighted for improving market share post-brand transformation and reasonable valuation. Cisarua Mountain Dairy (CMRY IJ, Buy, IDR 9,150) benefits from the middle-class trend of cooking at home. Ultrajaya Milk (ULTJ IJ, Buy, IDR 2,550) is a direct beneficiary of the free school meal program. Larger caps like Indofood CBP (ICBP IJ, Buy, IDR 15,800) and Sumber Alfaria (AMRT IJ, Buy, IDR 2,500) offer slower growth but limited downside risk. Conversely, Nomura retains Reduce ratings on Unilever Indonesia (UNVR IJ, IDR 1,800) and Gudang Garam (GGRM IJ, IDR 12,600) due to stretched valuations and slow growth.