CIMB Indofood Sukses Makmur Company update - The rise of consumer branded products

(INDF IJ / INDF.JK, TRADING BUY - Maintained, Rp1,370 - Tgt. Rp1,485, Consumer)

EBIT margins for Indofood's consumer branded products shot up to 10.9% in 1Q09, as noodle margins rose to 12.2%, the highest in 20 quarters. Consequently, the division's EBIT contribution climbed to 38%, the highest in over five years. We believe this is sustainable given benign competition. Bogasari's worst quarter, margin-wise, should also be over as high-cost stock has been depleted. We raise our earnings forecasts by 18-24% on higher margin assumptions. This lifts our sum-of-the-parts valuation by 15% and our target price to Rp1,485 (from Rp1,350), still based on a 20% discount to NAV. Maintain Trading Buy.