---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 255168
conversation_id: aabe08d4-291f-479e-a7ee-5a68eaf2a37d
citations: 2
created: 2026-05-31 20:26:10Z
---

# Provide a one‑year narrative of Kalbe Farma, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Kalbe Farma (KLBF IJ) — One-Year Narrative (mid-2025 to mid-2026)

A year ago, Kalbe Farma was a defensive but tired blue-chip pharmaceutical name — Indonesia's dominant integrated pharma operator priced for stagnation. Over the subsequent twelve months, an operational reacceleration, a margin inflection, and a sentiment reset transformed it into one of CLSA's preferred Indonesia ideas. The arc moves through three phases.

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## Phase 1 — Entering mid-2025: A "Hold" on a de-rated franchise (May 2025 starting point)

Heading into the period in question, CLSA had spent over a year cautious on the name. The November 2024 healthcare update carried KLBF at **HOLD with TP Rp1,550** against a spot price of Rp1,480 (+5% upside, US$4.4bn market cap) — a stark contrast to the **O-PF** calls on hospital peers Hermina and Mitra Keluarga [1]. The investment thesis acknowledged Kalbe's structural strengths — net-cash balance sheet, diversified four-pillar portfolio — but flagged that the company was **"seeing challenges due to shifting spending patterns, post-Covid normalisation and competition"** [2].

The de-rating story ran deeper. CLSA noted that the stock **"has de-rated since mid-2014 due to stronger-than-expected cannibalisation by unbranded generics upon the implementation of national healthcare insurance (JKN)"** [3] — a multi-year structural overhang in which the BPJS universal coverage scheme had compressed pricing power on Kalbe's branded-generics franchise. The principal forward catalyst flagged was the **biosimilar / novel biologic pipeline**, expected to carry better margins than commodity generics if new launches succeeded [4].

The macro backdrop was also unhelpful. The April 2025 healthcare update flagged that **"the Indonesian universal healthcare system (BPJS) has been experiencing a monthly budget deficit since the end of 2023"**, forcing the sector to mitigate the risk through different operational strategies [5]. Against this, management's guide of **8–10% revenue and net-profit growth for 2025**, driven by the prescription pharma segment (10–13%), distribution (9–11%), consumer health (8–10%) and nutritionals (5–6%), looked credible but unexciting — particularly with consumer health and nutritionals seeing **"down-trading toward more affordable products"** that management hoped would be offset by oncology and biologic specialties [6].

The crucial signal in this preview note was the **margin call**: management said **"margins have reached the bottom"** and guided flat gross margin for 2025 [7], with raw-material procurement **"cautiously shifting … from USD to RMB"** to dampen FX volatility — and the stock was trading at only **15x PE 25CL** [8]. A 22x target multiple — −0.5 SD below the five-year mean — anchored the valuation framework [3]. The recommendation history table showed how compressed sentiment had become: ratings on KLBF had stair-stepped down from BUY/~Rp2,100 in Sep 2022 to a sequence of O-PF / U-PF / SELL calls into 2024, finally hitting **HC U-PF ~Rp1,050 and HLD ~Rp1,100 in Mar 2025** — sub-Rp1,200 was the prevailing read [9].

## Phase 2 — The 18 May 2025 upgrade: from HLD to O-PF, "Solid roadmap"

The pivot moment came with the **18 May 2025 single-stock note** that transferred coverage from Jennifer Widjaja to Omar Abdulaziz, **upgraded the rating from HOLD to OUTPERFORM, and raised the target price from Rp1,550 to Rp1,740** [10]. Three drivers underwrote the call:

**1. Top-line reacceleration was already visible.** 1Q25 prescription pharma — the backbone of the group — grew **6% YoY and 5% QoQ**, with branded generics +17% YoY (offsetting the gradual unbranded-generics drift), and both unbranded generics and licensed products posting **+6% QoQ** revenue growth [14]. This was tangible evidence that the post-2023 slowdown was reversing, not a one-quarter blip.

**2. Margin inflection thesis crystallized.** Gross margin was projected to **expand +100bps to 39.8% in 2025**, supported by improving margin contribution from distribution and nutritionals on lower raw-material prices [12]. The nutritionals story was particularly tangible — **skimmed milk prices had fallen to US$2,600/MT in 1Q25** (vs US$4,400 at the 3Q22 peak), driving the nutritionals gross margin to **55%** [17]. On the cost side, marketing and salary expenses had structurally declined as a share of sales (marketing 7.2%, salary 8.4% in 2025CL vs ~12% and ~9.5% in 2018), with **1Q25 EBIT margin printing 15.6%** on seasonal phasing before normalising; **EBIT margin was forecast to expand 0.5pp to 13.2% for 2025** [13].

**3. The valuation re-rate framework.** The new TP applied **22x 25-26CL average EPS — near −0.5 SD below the five-year mean** — argued to be justified by "better earnings growth and further contribution from the specialties segment to support EBIT margin" [11]. The forecast set was: **revenue Rp35.16tn (+8% YoY) in 25CL → Rp37.84tn in 26CL → Rp40.71tn in 27CL**; net profit **Rp3.50tn → Rp3.81tn → Rp4.16tn**, implying ~8–9% EPS growth annually, dividend yield 2.1–2.6%, and ROE expanding from 14.7% (2024A) to **15.3% by 2027CL** [15]. CLSA's earnings estimates were raised 3%/2% for 25CL/26CL to reflect the recovery momentum [16].

Versus prior model, the new numbers showed **net profit lifted 3%/2%** for 25CL/26CL, with **gross margin pushed from 39% to 40%** in both years and **operating margin moved up to 13%** [16]. EBITDA growth was modelled at **+11.2% in 25CL** — a meaningful acceleration vs the −14.3% trough in 2023 [16].

## Phase 3 — Validation through realised numbers (FY25 results and Q1 2026)

Two days after the upgrade, the **20 May 2025 Indonesian market note** formalised KLBF's inclusion in CLSA's Indonesia top-picks list. Headline tear-sheet stats: **Rec O-PF, mkt cap US$4.3bn, price Rp1,455, TP Rp1,740, total return +21.9%** [18]. The rationale crystallised the cross-current of forces: **"sales momentum to continue (25CL: 8%) post slower growth in 2023. Prescription pharma segment remains the backbone, supported by unbranded generics and double digit growth of specialty category which carries higher margin. Lower raw material prices, improvement in distribution's margin, and stronger IDR will support margin"** [19].

Subsequent realised numbers vindicated this stance:

**FY2025 (full year, audited statutory P&L)**
| Metric (Rp mn) | FY2025 | FY2024 | YoY |
|---|---|---|---|
| Sales and revenue | 35,324,544 | 32,627,776 | +8.3% [21] |
| Gross profit | 14,055,520 | 12,957,040 | +8.5% [21] |
| Profit before tax | 4,778,475 | 4,218,875 | +13.3% [21] |
| Net profit | 3,744,375 | 3,246,570 | +15.3% [21] |

FY25 net profit of **Rp3.74tn** came in **~7% above the CLSA 25CL forecast of Rp3.50tn** [15] — a clean upside surprise. Revenue growth landed within the 8–10% management guide [6]; the EBIT margin and gross margin expansion stories both played out, with net margin rising from 9.95% in 2024 to **10.60% in 2025**.

**Q1 2026 (interim, unaudited)**
| Metric (Rp mn) | 1Q26 | 1Q25 | YoY |
|---|---|---|---|
| Net sales | 9,678,361 | 8,788,190 | +10.1% [20] |
| Gross profit | 3,706,885 | 3,619,092 | +2.4% [20] |

Top-line momentum **accelerated to +10% YoY** in the seasonally strong first quarter — comfortably above the medium-term 8% trajectory CLSA had baked in [16] — even as gross margin compressed (38.3% vs 41.2% a year earlier) on COGS rising faster than sales. The Q1 2026 print therefore showed a real-world tension: **volume / revenue reacceleration was clearly delivering, but the margin-inflection thesis required watching** because raw-material tailwinds and FX hedging benefits do not compound infinitely. Net cash position remained intact, dividend policy at ~40–45% payout was preserved [16], and the FY25 outturn had reset the earnings base higher.

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## Stitching the narrative: what shaped sentiment and valuation

**The de-rating bottomed.** Coming into mid-2025, KLBF traded near a **PE band low of ~15x** [8] — the cheapest in over a decade — reflecting investor fatigue with the JKN cannibalisation story and uncertainty about whether the post-Covid down-trading was structural. The 22x target multiple [3, 11] argued the stock should trade meaningfully higher even on a still-conservative multiple frame (−0.5 SD vs five-year mean), purely on the back of a credible earnings recovery.

**Three forces converged to drive the re-rate:**
1. **Operational evidence** — 1Q25 prescription pharma growth [14] proved the slowdown was self-correcting, not terminal.
2. **Margin levers** — lower skimmed milk costs feeding the nutritionals margin to 55% [17], distribution-margin recovery [12], structurally lower marketing/salary cost ratios [13], and the USD→RMB raw-material switch [8] together created a credible path to multi-year EBIT margin expansion.
3. **Macro / policy tailwinds** — IDR stability and BPJS reform momentum [19] supplied the externalities. The May 2025 capex deep-dive flagged that the broader Indonesian capex cycle was looking for catalysts (government execution, monetary easing) — and named KLBF among the pure-pharma sector's beneficiaries of policy-driven volume support [19].

**Where the watch-points sit at the end of the period.** The 1Q26 gross margin compression [20] is the single most important data-point to monitor against the thesis. If raw-material disinflation reverses, the IDR weakens, or down-trading reaccelerates in consumer health and nutritionals [6], the margin-expansion leg of the thesis comes under pressure even if topline keeps printing +8–10%. Long-duration risk anchors remain unchanged: **80% USD-denominated raw materials vs 95% IDR-denominated sales** [3] is the structural FX mismatch the company has been trying to manage by shifting procurement to RMB.

**Net assessment of the year.** Investors moved from treating Kalbe as a defensive, low-growth, range-bound name into accepting that 2025 marked an earnings inflection — FY25 net profit beat the analyst forecast by ~7% [15, 21], 1Q26 sales kept the +10% YoY pace [20], and CLSA's coverage upgrade [10] and Indonesia-top-picks inclusion [18, 19] provided the analytical scaffolding. The narrative arc was: **dominant franchise that had become unloved → operationally and structurally inflecting → re-rate justified by both earnings delivery and the still-cheap multiple anchor.**

---

**Sources**
[1] Indonesia healthcare (The rising pulse) — CLSA (28-Nov-2024) — 607945683LinqAlpha.PDF
[2] Indonesia healthcare (The rising pulse) — CLSA (28-Nov-2024) — KLBF investment thesis — 607945683LinqAlpha.PDF
[3] Indonesia healthcare (The rising pulse) — CLSA (28-Nov-2024) — KLBF valuation & risks — 607945683LinqAlpha.PDF
[4] Indonesia healthcare (The rising pulse) — CLSA (28-Nov-2024) — KLBF catalysts — 607945683LinqAlpha.PDF
[5] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — sector overview — 607955557LinqAlpha.PDF
[6] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — KLBF promising outlook — 607955557LinqAlpha.PDF
[7] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — KLBF margin bottom — 607955557LinqAlpha.PDF
[8] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — KLBF segment revenue & margin — 607955557LinqAlpha.PDF
[9] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — KLBF recommendation history — 607955557LinqAlpha.PDF
[10] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — upgrade & TP raise — 607959722LinqAlpha.PDF
[11] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — valuation rationale — 607959722LinqAlpha.PDF
[12] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — margin outlook — 607959722LinqAlpha.PDF
[13] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — EBIT margin & expense leverage — 607959722LinqAlpha.PDF
[14] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — 1Q25 prescription pharma — 607959722LinqAlpha.PDF
[15] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — financial summary — 607959722LinqAlpha.PDF
[16] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — growth & margins table; forecast revisions — 607959722LinqAlpha.PDF
[17] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — skimmed milk & nutritionals margin — 607959722LinqAlpha.PDF
[18] Indonesian market (Awaiting animal spirit) — CLSA (20-May-2025) — KLBF tearsheet — 607959958LinqAlpha.PDF
[19] Indonesian market (Awaiting animal spirit) — CLSA (20-May-2025) — KLBF top-pick thesis — 607959958LinqAlpha.PDF
[20] PT Kalbe Farma Tbk — Interim Report 1Q26 (31-Mar-2026)
[21] PT Kalbe Farma Tbk — FY2025 Statement of Profit or Loss (year ended 31-Dec-2025)

## Citations

- [20] **PT Kalbe Farma Tbk (KLBF-ID) - Interim Report for period end 31-Mar-2026 (English) - PDF** · external
- [21] **Statement of comprehensive income, OCI components presented net of tax, by function - General Industry** · external

