Topline experienced QoQ declines in Consumer Health and Nutritionals. In 2Q25, KLBF booked revenue of IDR 8.2tn (+3.4% YoY; -6.9% QoQ), bringing 6M25 topline to IDR 17.1tn (+4.6% YoY), slightly lower than our expectation, resulting in our downward revisions (figure 1). We saw relatively stable QoQ performance of Prescription reaching IDR 2.5tn (+6.0% YoY; -0.9% QoQ) with Distribution coming in at IDR 2.8tn (+9.1% YoY; -2.2% QoQ). However, Consumer Health experienced notable QoQ decline due to seasonality with revenue falling to IDR 1.1tn (+0.9% YoY; -20.2% QoQ), while Nutrition also weakened to IDR 1.9tn (-5.8% YoY; -11.8% QoQ), largely due to subdued purchasing power weighing on overall sales. Nonetheless, it is worth noting that in dairy category, KLBF’s sales contraction (-3% YoY; Industry: -9% YoY) was better than the sector, reflecting consumer confidence in its products.

 

Lower raw materials prices cushioning margins. On the profitability front, KLBF’s 2Q25 GPM stood at 40.7% (1Q25: 41.6%; 2Q24: 39.5%), slightly lower compared to 1Q25 due to business mix changes. This is despite COGS being partly cushioned by lower raw materials prices, including oil-related (USD 67.2/bbl, -18.9% YoY), including packaging (PP dropped -3.6% YoY) and skim milk powder (USD 2,430/MT, -0.9% YoY). EBIT margin narrowed to 12.9% (1Q25: 15.6%; 2Q24: 13.5%), which we attribute to higher A&P run rate of 8.6% (1Q25: 8.0%; 2Q24: 6.5%) as the company focuses on revitalizing its legacy brands to stay relevant among younger consumers. At the bottom line, KLBF booked 2Q25 net profit of IDR 898bn (+6.0% YoY; -16.6% QoQ), bringing 6M25 net profit to IDR 2.0tn (+9.4% YoY), slightly lower than our forecast.

 

Lower company guidance. Following its 1H25 results, KLBF revised down FY25 topline and bottom-line growth guidance to 6–8% (previous: 8–10%), following this we adjust our topline and bottomline expectations by -3.9/-9.5% 2025F. Nutritional segment is projected to grow only ~1–3% (previous: mid-single-digit growth) amid weak consumer purchasing power. To adapt to shifting consumer behavior toward value-for-money products, particularly in Nutritional and Consumer Health, KLBF plans to introduce more affordable SKUs (e.g., sachets) to provide lower price points, while its flagship products such as Morinaga and Entrasol are positioned at premium vs. peers. For Pharmaceutical segment (~9–11% FY25 growth), specialty products are expected to sustain robust double-digit growth, with significant room for expansion, especially in oncology. Meanwhile, Distribution & Logistics segment (~high-single to low-double digit FY25 growth) will be supported by new principals and larger medical equipment SKUs; KLBF currently awaits BPOM’s approval as early as next month on its PET scan (Cyclotron) equipment for commercialization in Jakarta area.

 

Maintain BUY on potential new strategy as positive longer-term catalyst. While KLBF is currently not the cheapest in the sector in terms of valuation, we currently retain our BUY rating given its strategy to reshape business mix contributions, which could be accretive to profitability over the longer term. In addition, we like the defensive nature of its products on the back of the current difficult and challenging market operating conditions. Key risks to our call: 1) swing in raw materials prices, 2) elevated DXY, and 3) weaker-than-expected purchasing power.