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Indonesia’s consumption spending has emerged as a pivotal force propelling the country’s economy. In 2022, the nation’s GDP expanded by 5.31% year-on-year, marking the highest growth rate in nine years, wherein consumer spending constituted nearly half of the country’s economy.
Along these lines, Indonesia’s Fast-Moving Consumer Goods (FMCG) industry showcased a robust performance, attaining an 11% surge in retail sales during the same period, a 4% increase compared to 2021. This sector is also attracting a lot of attention from the investors.
Now, in 2023, Indonesia’s consumption trends continue to steer the country’s economic growth. In the period between April and June this year, the nation’s GDP grew by 5.15% year-on-year, the fastest rate in three quarters. This surge was attributed primarily to an increase in household and government spending. Notably, household spending saw a significant acceleration, with a year-on-year growth of 5.23% in the quarter ended June 2023 compared to 4.54% in the previous quarter.
Moreover, a study conducted by NielsenIQ revealed that 53% of consumers in Indonesia stated they were better off financially, a notably higher proportion compared to the global average of 26%. “Even consumer confidence in economic growth remains solid, evident by last year’s increase in consumer spend,” informed the consumer intelligence company.
Acknowledging the importance of consumer spending in enhancing the country’s economic growth, Indonesian President Joko Widodo (Jokowi), earlier this year, encouraged the population to increase their expenses.
Presently, analysts think that the consumer-related stocks within the nation could benefit from the substantial spending allocation of IDR 3,304.1 tn ($216 bn) set in Indonesia’s budget for the year 2024.
“With the boon from the export sector fading this year, Indonesia will be looking to domestic consumption to deliver the bulk of growth. The outlook for domestic consumption does have some upside after inflation appears to have peaked in late 2022,” said ING.
How to invest in Indonesia’s consumption?
Given a promising outlook for Indonesia’s consumption activities, here is a collection of three stocks from the country that investors might want to look into.
PT Indofood Sukses Makmur Tbk
This Indonesian company offers a diverse range of packaged food products. It additionally functions as a food solutions entity, encompassing activities ranging from raw material cultivation and processing to the introduction of consumer goods in the market.
In the fiscal year ended March 2023, the company witnessed a year-on-year rise in net sales by 12%, reaching IDR 110.83 tn ($7.24 bn). During this period, Indofood’s income from operations increased by 16% year-on-year to IDR 19.69 tn ($1.28 bn). Along with this, the company’s core profits grew by 12% year-on-year, amounting to IDR 9.06 tn ($592.12 mn).
With a market cap of $4.08 bn, the company’s stocks are listed on the Indonesia Stock Exchange (IDX: INDF). Indofood’s stock has risen by 5.26% in the past year. It has a PE ratio of 6.93, a forward PE ratio of 5.81, and a price-to-book ratio of 1.08. Besides Indonesia, American Depository Receipts (ADR) are listed on NASDAQ (OTCMKTS: PIFMY) in the US and are accessible through over-the-counter transactions.
PT Mayora Indah Tbk
Established in 1977, PT Mayora Indah Tbk, commonly known as Mayora, is an Indonesian food and beverage company. It is the global leader in coffee candy production under the renowned Kopiko brand.
The company registered a 9.93% year-on-year rise in revenue, amounting to IDR 30.67 tn (~$2 bn) in 2022. During the same period, its gross profit stood at IDR 6.84 tn ($447.03 mn), marking a decline compared to the figures from 2021.
Mayora has a market cap of $3.91 bn and is traded on the Indonesia Stock Exchange (IDX: MYOR). The company’s shares have fallen by 40.21% since last year. It has a PE ratio of 23.89, a forward PE ratio of 22.99, and a price-to-book ratio of 4.54.
PT Hero Supermarket Tbk
PT Hero Supermarket Tbk, popularly recognised as Hero, stands as a major retail establishment in Indonesia. Commencing its operations in 1971, Hero presently manages over 700 outlets across Indonesia, operating under six distinct brand identities.
The company’s net revenue was up by 27% year on year to IDR 4.44 tn ($290.17 mn) in 2022. During the same period, the company’s gross profit increased by 22% year-on-year to IDR 1.86 tn ($121.56 mn).
Hero’s stocks are listed on the Indonesia Stock Exchange (IDX: HERO). The company has a market cap of $375.79 mn. Since last year, the company’s shares have fallen by 22.49%. Along with that, the shares have a PE ratio of 20.69 and a price-to-book ratio of 4.90.
Editor’s note: All stock movement figures as of August 23, 2023.
