Some weakness: 2Q26F preview on post-Lebaran timing shift. For KLBF, we forecast 2Q26F revenue of IDR 8.2tn (-0.6% YoY; -14.9% QoQ) and net profit of IDR 1.1tn (-2.2% YoY; -14.7% QoQ), weighed down by the post-Lebaran timing shift. In 1Q26, KLBF posted revenue of IDR 9.7tn (+10.1% YoY; +3.7% QoQ), supported by festive seasonality and stronger OTC demand, in line with estimates (SSI: 26.1%; Cons: 25.6%). Growth was driven by solid performance across most segments: Prescription reached IDR 2.6tn (+8.5% YoY; +1.7% QoQ), while Distribution posted IDR 3.5tn (+21.1% YoY; -1.0% QoQ) on the expansion of marketing services and onboarding of new principals (Bayer). Consumer Health reached IDR 1.4tn (+3.2% YoY; +13.9% QoQ), mainly on Lebaran stock-up shift to Dec-25 for FY26, while Nutrition was flat at IDR 2.2tn (+1.6% YoY; +8.1% QoQ) amid continued weak purchasing power. Consequently, 1Q26 net profit reached IDR 1.0tn (-4.4% YoY; -0.5% QoQ), in line with estimates (SSI: 29.3%; Cons: 26.8%), reflecting NPM of 10.6% (4Q25: 11.1%; 1Q25: 12.3%).

Taking more conservative stance on challenging operating conditions. Despite earlier guidance for high single-digit topline growth, management is currently reviewing KLBF’s FY26F outlook amid intensifying geopolitical tensions. On the cost side, plastic packaging, accounting for ~15% of COGM under normal conditions, remains a key exposure, despite existing 3–4 month raw materials buffer. Additionally, the Pharma API segment has started to see chemical price increases. Thus, we expect more apparent adverse impact on margins in 2H26F.

Toning down expectations on cost pressures due to geopolitical risks. We maintain our FY26F revenue forecast while lowering net profit by 8.3% on the back of higher input costs on elevated oil prices which are likely to persist until next year. For FY27F, we cut revenue and net profit forecasts by 3.9% and 9.3%, respectively, particularly given weaker purchasing power creating challenging environment in passing on higher raw materials and opex costs.

Positive view on KLBF's new consumer health strategy as mid-term catalyst. In line with our earnings downgrades (figure 2), we cut our TP to IDR 1,000, implying 26F P/E of 13.0x. While the stock is not the most attractive in the sector from a valuation standpoint, we believe its ongoing efforts to reshape its business mix in consumer health could enhance profitability over time. To fund this, 2026F capex of ~IDR 1tn will be allocated for maintenance and general capacity expansion, including the development of a new dairy factory under the Morinaga brand (utilizing Tetra Pak packaging) targeting mid- to high-income consumers. Additionally, we favor KLBF’s defensive product portfolio amid continued challenging macroeconomic backdrop. Thus, we maintain our BUY recommendation. Key risks: 1) volatility in raw materials prices, 2) stronger DXY, and 3) weaker-than-expected purchasing power.