• Over the past 5D, cocoa prices rose +4.0%, primarily due to heavy rainfall in Ivory Coast, which flooded several plantations in the country and caused a surge in mortality rate of cherelles (immature cocoa pods) and cacao flowers to ~60-70% (average: ~25%), leading to lower production forecasts. The increase in cocoa prices will adversely impact MYOR.
• Wheat prices declined -2.7% over the week on the back of prospects for much-needed rainfall in drought-ridden Central US, with the added precipitation expected to help bolster winter wheat crops. The decline in wheat prices should benefit ICBP and MYOR.
• CPO saw an uptick of +3.8% in the past 5D, driven by concerns regarding tight supply outlook from Indonesia and Malaysia, coupled with rising biodiesel demand. We believe the increase in CPO prices could lead to further hikes in cooking oil prices, negatively affecting UNVR>ICBP>CMRY.
• Raw materials prices remained mixed, impacting consumer companies’ costs in different ways. Stock-wise, we maintain ICBP as top pick with TP of IDR 14,000/share (PE 2024F: 20.6x), as the company may benefit from lower wheat prices. We also like SIDO (TP: IDR 850/share, 21.1x FY24F PE) due to its low USD cash cost as DXY continues to strengthen. Additionally, we expect these two companies to obtain purchasing power support from the government’s rice aid disbursement in Aug-Dec 2024. On the flip side, we expect MYOR’s gross margin to remain under pressure due to higher coffee and cocoa prices.