January 22, 2025
Sweet but Harmful

Market Commentary
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Sweet food and drinks are so hard to resist, right? From kids to adults, everyone loves them, and honestly, so do I!

But did you know? Because of this habit, in 2021, Indonesia ranked fifth in the world for the highest number of diabetes cases, according to the International Diabetes Federation.
 

Be careful! Diabetes is often called the “mother of all diseases.

If it’s not controlled, it can lead to serious complications like heart disease, stroke, or kidney problems, making things worse and treatment costs even higher.

In fact, data from Ministry of Health shows that in the last 10 years, the prevalence of diabetes in Indonesia has doubled to 10%.

This means 28 mn people out of 280 mn are living with diabetes.

What’s worse, Deputy Minister of Health stated that 28.7% of Indonesians consume too much sugar, salt, and fat.

No wonder Indonesia is ranked sixth in the world for the highest sugar consumption.
 
10 Countries with the Highest Sugar Consumption in the World in 2023



Source: Databoks

It doesn’t stop there, 95.5% of us eat too little fruit and vegetables, and 35.5% don’t exercise enough. So, it’s no surprise that diabetes is spreading fast.

To tackle this, the government is planning to impose a sugar tax on packaged drinks starting in 2H25. But for now, regulations about sugar content limits and tax rates are still being discussed.

Parliamentary Budget Committee has suggested starting with a 2.5% tax and gradually increasing it to 20%.

Meanwhile, the government proposed a flat rate: IDR 1,500/liter for sweetened drinks like soda, bottled tea, and energy drinks, and IDR 2,500/liter for syrups or concentrates.

If this sugar tax is implemented, questions will arise about its impact on prices and revenues for sweet drink companies, including Cimory.

However, CMRY has stated that the regulation is not yet finalized, and it’s still unclear whether milk products will be taxed as well.

Even if milk products are included, ASP might increase by around 2.5%, or about IDR 200–625/product.

But don’t worry, the impact on CMRY’s main market won’t be too significant because they focus on the upper-middle or premium segment.

Besides, most CMRY products haven’t had a price increase in 4–5 years, except for UHT milk, which has had two price hikes since 2020.

Looking ahead to 2025, CMRY is gearing up with new products.

After the success of their yogurt sticks in MT, they plan to expand into GT with more affordable prices.
 

They’ll also launch a new ready-to-eat sausage in GT, following strong performance in MT and mini markets.

Additionally, CMRY plans to use bundling strategies in GT, combining affordable ready-to-eat products with UHT milk to boost sales.

CMRY hinted that their 2024 performance is still on track with guidance, projecting revenue growth of 10–20% yoy.
 

Their 2024 net profit is estimated to hit IDR 1.5 tn, up 18.6% yoy.

In 2025, CMRY is expected to shine even brighter with net profit growing 19% yoy to IDR 1.8 tn.

This will be driven by increasing sales and healthier margins, thanks to normalized raw material costs.

Revenue is projected to reach IDR 10.4 tn, up 16.1% yoy, with a stable GPM of 43.2%
 

We maintain a BUY recommendation for CMRY with a target price of IDR 6,500.

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