Leading FMCG distributor with strong product portfolio predominantly in dairy. Established in 1986, TGKA is Indonesia’s leading FMCG distributor, partnering with several prominent brands with Sarihusada Generasi Mahardika (SGM), Nutricia Indonesia Sejahtera (Nutrilon), Wyeth Nutition Duaenam (S-26), Yupi Indo Jelly Gum, Multi Bintang Indonesia, and Mars Symbioscience Indonesia, accounting for their top 6 principals contributing c.90% of total revenues. We like TGKA for its consumer exposure, in particular dairy as the main top line source, contributing ~70% of FMCG product revenue, thanks to SGM (Sarihusada/Danone), which alone provides c.80% of dairy sales. While principal concentration is a concern, many of these partner brands are category leaders and have been with TGKA for 15-20+ years (figure 3), suggesting strong business loyalty and competitive performance across various economic cycles.

Rising importance of distribution on shifting consumer preferences in Indonesia. As subdued purchasing appetite weighs on Indonesia’s FMCG landscape, value for money is prioritized over brand loyalty and premium positioning, capping basket size growth. At the same time, growing adoption of omnichannel shopping is driving greater demand for distributor presence in rural areas and last-mile delivery, leading to elevated levels of capex and heightened emphasis on operational efficiencies required for margin support. In response, FMCG distributors plan to accelerate AI adoption and automation to raise profitability. Key benefits of AI implementation are: 1) 20–30% lower inventory levels through improved demand forecasting; 2) 7–15% hike in warehouse capacity via higher resource utilization; 3) 15–20% lower operating costs across multiple functions.

Improved 2026F trajectory on low base effect & more favorable macro outlook. Underpinned by favorable macroeconomic backdrop, particularly the de-escalation of trade tensions coupled with incoming new brand principal in 4Q25, we forecast TGKA to deliver recovery in 2026F to IDR 13.3tn in 2026F (+7.8% YoY), also helped by low-base effect in FY25 top-line of IDR 12.3tn (-7.5% YoY). On the cost side, we expect gross margin to remain stable at ~9–10% over the medium term, as Indonesian consumers continue to shift their purchasing priorities from brand loyalty to value-for-money, limiting potential upside from product premiumization. On EBIT, margin should expand ~10–30 bps, supported by automation to allow improved operating efficiencies. Thus, we expect 2026F net profit recovery to IDR 414.5bn (+11.9% YoY).

Initiate BUY with IDR 7,400 TP, reflecting 25% upside potential. On the back of robust balance sheet (21.9% cash to market cap), solid ROE of 16.5% (vs. peers: 5.4%), strong product portfolio, and earnings recovery ahead, we initiate coverage on TGKA with BUY and TP of IDR 7,400, offering 25% upside. Our TP is based on 2026F P/E of 16.4x, 20% premium to peers, justified by TGKA’s substantially higher than sector average ROE. Key risks to our positive call: 1) weaker purchasing power, 2) elevated DXY, and 3) intensifying trade and/or geopolitical tensions.