• Coffee plummeted -8.1% over the past 5D, as investors started to pull back from their coffee futures investments. According to Ganes Consulting, recent moves in coffee prices were caused by ‘financial plays’ than by actual supply and demand. Market participants now believe high margin calls have prompted coffee exporters to unwind hedges. The decline in prices will benefit MYOR, as coffee constitutes ~13% of its raw materials costs.
• +4.1% WoW jump in cocoa prices to USD 9,442/MT has brought YTD avg. price to USD 7,845/MT, up +147.4% YoY, which is also a 50-year high price average. The jump was mainly driven by ICCO’s deficit estimates of ~478k MT, the largest in over 60 years. Higher cocoa prices are expected to impact MYOR the most among consumer companies.
• CPO prices rose +5.7% in the past 5D, mainly due to worse-than-expected weather conditions in Malaysia. The country’s meteorological department has issued warnings of heavy precipitation in several regions that could negatively impact CPO production. Heightened CPO prices should impact UNVR> ICBP> CMRY.
• Raw materials prices remained mixed, impacting consumer companies’ costs in various ways. Stock-wise, we retain ICBP as top pick with TP of IDR 14,000 (PE 2024F: 20.6x), as the company may benefit from lower wheat prices (YTD: -12.1%). Meanwhile, we expect MYOR’s gross margin to remain under pressure due to high coffee and cocoa prices.