We set a SOTP-based target price of Rp14,500. SOTP approach is appropriate, in our view, given the company’s exposure to different businesses with various risks and industry outlook. Our target price is derived from a 2025E EV/EBITDA of 10x for Noodles, 10x for Dairy, 9x for Nutrition, special foods, and food seasonings, 6x for snacks, and book value for beverages; all of the multiples are based on regional and global peers of the respective businesses. Our target price is equivalent to a 17x 12M Fwd P/E, lower than 1SD below 5Y mean which we believe is appropriate due to higher balance sheet risk from USD-denominated debt and higher business exposure to frontier markets since 2021.

Key downside risks that could prevent the shares from achieving our target price include: 1) Weak fundamental performance of Pinehill assets; 2) significant depreciation of IDR; 3) Significant hike in wheat and raw material prices; and 4) Weak consumption recovery and volume growth due to Covid-19 impact on purchasing power.