Middle East Supply Chain Crisis Boosts Subsidiary Expansion; Indonesia's Palm Oil Policy May Reduce Costs

Overview

Nomura Securities has reiterated its Buy rating on Indonesian food company Indofood CBP (ICBP.JK), lowering the target price from IDR 15,800 to IDR 14,500. The report notes that the Middle East supply chain crisis has given ICBP’s subsidiary Pinehill a competitive edge in market share, while Indonesia’s new palm oil export regulations could reduce cooking oil costs. Current valuations are seen as already reflecting negative factors.

Core views

Middle East Supply Chain Advantage: The war in the Middle East has disrupted logistics, but ICBP’s subsidiary Pinehill—leveraging localized production facilities in Saudi Arabia, Egypt, and elsewhere—has maintained product availability while competitors relying on imported finished goods face shortages. Korean brands have reportedly lost market share in Saudi Arabia, which Pinehill is now recapturing. Future price increases may help pass on cost pressures, and current volume growth is alleviating margin pressure. Indonesia’s CPO Policy Tailwind: Starting in June, Indonesia will implement a new state-controlled export agency for palm oil. During the transition period, spot traders have paused purchases, driving down domestic CPO prices. Similar to the 2022 export ban, ICBP benefited from lower cooking oil costs during 3Q22–4Q22, leading to gross margin expansion. Valuation & Forecasts: The current share price implies an FY26F P/E of 8.4x, trading at +0.6 standard deviations above its five-year average. Earnings forecasts have been revised down by 8%/2% (FY26F/FY27F) to reflect rising cost trends, and a new FY28F forecast has been introduced. The target price is based on an 18x FY26F P/E, implying 112.5% upside.

Analysis framework

The firm employs an event-driven and cost-pass-through analytical framework: First, it assesses the impact of Middle Eastern geopolitical disruptions on supply chains, comparing Pinehill’s localized production capabilities against competitors’. Second, it analyzes how policy changes in Indonesia affect raw material pricing, referencing historical precedent (the 2022 CPO export ban) to validate the positive impact of lower input costs on gross margins. Finally, it integrates valuation multiples and earnings revisions to determine whether current pricing fully reflects risks.

Methodology notes

• Valuation MethodPE/PEG valuation

  Using FY26F P/E multiple as valuation anchor

  The report derives its target price using an 18x FY26F P/E (0.6 standard deviations above the five-year average), applying a relative valuation approach to assess whether the current price is undervalued relative to historical ranges.

• Industry/Value Chain Analysis FrameworkUpstream-Midstream-Downstream Transmission

  Policy-driven transmission effect on raw material costs

  Analyzes how Indonesia’s export policy influences CPO spot trading behavior, thereby affecting domestic palm oil prices and ultimately lowering ICBP’s cooking oil costs—demonstrating clear price transmission logic across the value chain.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Indofood CBP Sukses Makmur (ICBP.JK)

  Direct beneficiary: expands Middle East presence via subsidiary Pinehill; domestic operations benefit from lower CPO costs

  Strengths

  Integrated supply chain, localized production, high liquidity

  Weaknesses

  Sensitivity to raw material costs, FX volatility risk

  Comparison

  Pinehill holds a supply stability advantage over Korean brands reliant on imported finished goods in the Middle East

  Risks

  Higher-than-expected raw material costs, USD/IDR depreciation

Key data

• Target PriceIDR 14,500Reduced from previous target of IDR 15,800
• Current Share PriceIDR 6,825As of May 22, 2026
• FY26F P/E8.4xCurrent valuation level
• Target P/E18xFY26F multiple used to calculate target price
• Earnings Forecast AdjustmentFY26F -8%, FY27F -2%Reflects upward cost trends
• Implied Upside+112.5%Calculated based on target vs. current price

Impact & implications

The report views ICBP as a relatively defensive play amid high regulatory uncertainty in commodity and banking sectors, supported by strong liquidity and a valuation that has already priced in negative factors. Market share gains in the Middle East and potential cost reductions in Indonesia could provide dual catalysts, though risks around raw material costs and FX volatility remain.

Risks

• Raw material costs higher than expected
• USD/IDR exchange rate depreciation

What to watch

• Implementation details of Indonesia’s new export agency policy
• Recovery of supply chains in the Middle East