---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 264101
conversation_id: 9af81b4f-3626-4409-bae4-42c2a3682ec4
citations: 0
created: 2026-05-31 19:09:48Z
---

# What is the investment thesis for Kalbe Farma in the current market environment?

# Investment Thesis — Kalbe Farma (KLBF IJ)

**Corpus recency caveat**: The most recent internal CLSA coverage on Kalbe Farma is dated **18 May 2025** (the dedicated transfer-of-coverage / upgrade note) and **10 April 2025** (Indonesia healthcare sector note). The investment-thesis framework below reflects that vintage; readers should refresh against more recent quarterly prints since CLSA had only 1Q25 actuals at the time of writing. No newer CLSA notes on KLBF were found in the workspace.

---

## 1. Bottom-line stance (CLSA, transfer-of-coverage, 18-May-2025)

- **Rating: OUTPERFORM (upgraded from Hold)**. CLSA transferred KLBF coverage from Jennifer Widjaja to Omar Abdulaziz with this note [1].
- **Target price: Rp1,740** (raised from Rp1,550), implying ~16% upside from the Rp1,505 reference price on 16-May-2025 [2][3].
- **Methodology**: 22x PE applied to 25-26CL average earnings of Rp3,657bn → equity value Rp80,451bn ÷ 46,256bn shares = Rp1,740/share. 22x sits **near –0.5SD below the five-year mean** (avg 24.22x, +1SD 29.25x, –1SD 19.19x), so the call is **not premised on multiple re-rating** but on earnings recovery [24][3].

---

## 2. Core thesis: prescription pharma is the engine, margin is recovering

CLSA's investment thesis rests on four building blocks:

### (a) Prescription pharma is the structural growth driver
- **Prescription pharma now contributes ~28% of revenue** (second-largest after distribution at 33%); CLSA expects this segment to grow **+10% YoY in 2025**, well above the rest of the portfolio [4][5].
- The driver mix has shifted: management's quarterly disclosure shows **unbranded generics rising and branded generics under pressure**, while the **specialty contribution to pharma is rising from 11% (2023) → 14.5% (25CL) → 16.5% (27CL)** — these specialty SKUs carry better economics [17].
- 1Q25 actuals already showed prescription pharma +6% YoY / +5% QoQ, with branded generics +17% YoY despite the unbranded-generic shift [17].

### (b) Other segments stabilising rather than dragging
| Segment | 2025CL growth | Strategy |
|---|---|---|
| Prescription pharma | +10% YoY | Unbranded generics + rising specialty/biologic share [5] |
| Consumer health | +8% YoY | Brand loyalty (Extra Joss, Promag) + new preventative products for 2026 launch [6][18] |
| Nutritionals | +5% YoY | Powdered milk market contracting –4.2% YoY (Nielsen); KLBF responding with RTD (Entrasol liquid) and affordable SKUs (Chil-go, Diabetacare) to defend against down-trading [6][19] |
| Distribution | +8% YoY | Kalbe Group products = 63% of dist. revenue; digital push via Emos (B2B order mgmt) and Mostrans (B2B logistics); ramping local medical-device assembly [20] |

### (c) The "margin has bottomed" call — the most important leg
- Gross margin troughed in 2022-23 (39.5-40.0%) as unbranded generics and distribution (lower-margin businesses) gained share [21].
- CLSA forecasts **gross margin to expand ~100bps to 39.8% in 2025**, supported by (i) **lower skimmed milk prices** lifting nutritionals gross margin (skimmed milk fell from ~US$4,500/MT in early 2023 to ~US$2,600-2,700/MT in 1Q25), and (ii) product-mix management [7][21].
- **EBIT growth of +11% on +8% revenue growth** in 2025CL, with EBIT margin expanding ~0.5pp to **13.2%** as marketing and salary expenses continue to decline as a % of revenue [22][7].
- Management's own messaging at the April-2025 industry update echoed this: **margins have "reached the bottom"** and 2025 should be flat-to-up; KLBF is also **shifting raw-material procurement from USD to RMB** to dampen FX volatility [13][14].

### (d) Balance-sheet quality is a defensive anchor
- KLBF is **net cash** (Rp93/share in 2024 → Rp114/share in 25CL → Rp136/share by 26CL) [8].
- ROE 14.7% (2024) rising to 14.9% / 15.2% (25-26CL); ROIC 15.4% → 17.7% by 26CL; net debt/equity at –17.6% (2024) and trending more negative [8].
- The investment thesis explicitly cites **"strong financial position (net cash), diversified business model, dominant market share and a strong distribution network"** as the core long-term anchors — and notes the stock has been de-rated since mid-2014 due to **JKN (national insurance) cannibalisation of branded generics by unbranded generics** [11].

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## 3. Financial summary (CLSA, 18-May-2025)

| Year to 31 Dec | 2023A | 2024A | 2025CL | 2026CL | 2027CL |
|---|---|---|---|---|---|
| Revenue (Rp bn) | 30,449 | 32,628 | 35,163 | 37,837 | 40,707 |
| Net profit (Rp bn) | 2,767 | 3,241 | 3,504 | 3,809 | 4,157 |
| EPS (Rp) | 59.81 | 70.06 | 75.76 | 82.35 | 89.86 |
| EPS growth (% YoY) | (18.2) | 17.1 | 8.1 | 8.7 | 9.1 |
| PE (x) | 25.2 | 21.5 | 19.9 | 18.3 | 16.7 |
| Dividend yield (%) | 2.5 | 2.5 | 2.1 | 2.4 | 2.6 |
| ROE (%) | 13.2 | 14.7 | 14.9 | 15.2 | 15.3 |
| Net cash per share (Rp) | 56.9 | 93.3 | 114.3 | 136.1 | 146.8 |

Source: CLSA, 18-May-2025 [8]

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## 4. Catalysts (forward)

- **Biosimilar / novel biologics**: KLBF is developing biosimilars and novel biologics that carry better margins than unbranded generics. Successful launches would lift gross margin and could trigger re-rating [10].
- **Specialty contribution to pharma rising** to mid-teens of pharma sales by 25CL, providing the structural margin lift behind the EBIT margin expansion call [17].
- **Preventive consumer-health products** scheduled for 2026 launch (Sakatonik Gummy, EJ Sport Gel, Cerebrofort Gummy, Femmy etc.) layered on top of brand-loyalty assets (Extra Joss, Promag) [18].

---

## 5. Key risks (CLSA framing)

- **USD/IDR sensitivity is the single largest macro risk**: ~80% of raw-material costs are USD-denominated while ~95% of sales are in rupiah — a structural translation mismatch. The shift to RMB procurement only partially neutralises this [12][13].
- **Continued cannibalisation** of branded generics by unbranded generics within prescription pharma (the historical JKN headwind), though CLSA believes the worst is past [12][11].
- **Down-trading in consumer health and nutritionals** as Indonesian consumers shift to cheaper SKUs and the powdered-milk category contracts; mitigated but not eliminated by RTD/affordable launches [14][19].
- **BPJS (national insurance) deficit overhang for the broader sector**: claim ratio worsened from 95% (Nov-2023) to 114% (Jan-2025), with the government planning a 2026 premium hike. KLBF is less directly exposed than hospital names but the sector dynamic shapes consumer-pharmacy demand [15][16].

---

## 6. Where KLBF screens vs Indonesian consumer-staples peers

CLSA presents KLBF as part of an Indonesian consumer-staples peer set:

| Ticker | Company | Mkt Cap (US$bn) | PE 25F | PE 26F | EBIT m. 25F | Sales gr. 25F | EPS gr. 25F | ROE 25F |
|---|---|---|---|---|---|---|---|---|
| KLBF IJ | **Kalbe Farma** | 4.3 | **19.9** | 18.3 | 13.2% | 7.8% | 8.1% | 14.9% |
| UNVR IJ | Unilever Indonesia | 4.1 | 19.1 | 17.6 | 13.0% | 1.0% | 4.9% | 109.2% |
| MYOR IJ | Mayora Indah | 3.1 | 15.9 | 14.8 | 10.9% | 11.9% | 13.7% | 18.1% |
| SIDO IJ | Sidomuncul | 1.0 | 13.3 | 12.3 | 35.5% | 9.2% | 7.5% | 34.3% |
| ICBP IJ | Indofood CBP | 7.8 | 11.1 | 10.5 | 22.7% | 8.9% | 15.3% | 22.9% |
| INDF IJ | Indofood Sukses Makmur | 4.3 | 5.9 | 5.4 | 19.0% | 5.9% | 10.3% | 17.3% |
| CMRY IJ | Cisarua Mountain Dairy | 2.2 | 20.9 | 18.0 | 19.3% | 14.4% | 12.6% | 24.0% |
| **Domestic weighted avg** | | | 14.3 | 13.2 | 17.9% | 7.8% | 11.1% | 34.0% |

Source: CLSA, Bloomberg [23]

KLBF trades **above the staples weighted-average PE** but with a **lower EBIT margin** and **slower EPS growth than the peer median**. CLSA's Outperform call is therefore less a relative-value argument and more a story of **earnings momentum recovery from a depressed 2023 base + balance-sheet quality + biologics optionality**.

---

## Summary view

The "current market" thesis on Kalbe Farma, as articulated by the most recent CLSA note in the workspace (May 2025):

> **A net-cash, brand-rich Indonesian pharma platform where 2023 was the trough year. Prescription pharma (now ~28% of revenue) is re-accelerating to +10% YoY in 2025, gross margin is expanding ~100bps as skimmed-milk input costs roll over and as RMB procurement reduces FX leakage, and specialty/biologic launches provide a multi-year margin tailwind. EPS recovery of +8% in 2025CL and +8.7% in 2026CL underpins the 22x PE target (–0.5SD below five-year mean) and a Rp1,740 target price. Key tail risks are USD/IDR (80% USD raw materials vs 95% IDR sales) and continued branded-generic cannibalisation, but neither is severe enough to derail the earnings recovery thesis.** [1][3][7][9]

For a "today" (May 2026) view, the user should refresh against KLBF's subsequent quarterly prints (3Q25, 4Q25, 1Q26), the IDR vs USD path over the past 12 months, BPJS premium policy announcements (the planned 2026 premium hike), and any newer sell-side notes that may have arrived since the May-2025 CLSA upgrade.

---

**Sources**
[1] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — 607959722LinqAlpha.PDF (upgrade language)
[2] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — TP Rp1,740, O-PF rating
[3] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Rating rationale & TP methodology
[4] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Prescription pharma as backbone
[5] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Prescription pharma +10% YoY
[6] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Other segment growth outlook
[7] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Gross margin +100bps to 39.8%
[8] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Financials at a glance
[9] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Investment thesis (net cash)
[10] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Catalysts (biosimilar / biologics)
[11] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Valuation details / JKN derating history
[12] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Investment risks (USD/IDR exposure)
[13] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — Kalbe outlook 8-10%, RMB procurement shift
[14] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — Kalbe Farma promising outlook segments
[15] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — Sector update / BPJS deficit
[16] Indonesia healthcare (Navigating growth strategies) — CLSA (10-Apr-2025) — BPJS claim ratio 95% → 114%
[17] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — 1Q25 prescription pharma details
[18] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Consumer health (Extra Joss, Promag)
[19] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Nutritionals (powdered milk –4.2%)
[20] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Distribution mix & strategy
[21] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Better margin outlook
[22] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — EBIT margin expansion to 13.2%
[23] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Indonesian consumer staples peer table
[24] Kalbe Farma — O-PF (Solid roadmap) — CLSA (18-May-2025) — Valuation summary (Rp1,740)

