Good morning,
New capped branded
rice retail selling price
The government
announced a cap on retail selling prices of branded rice. The capped retail
selling price is ranging from IDR9,450 to IDR10,250 per kg for medium branded
rice, and IDR12,800 to IDR13,600 per kg for premium branded rice (subject to
sales area). The new capped prices are likely to be effective on 1 Sept. For
comparison, the current retail price for branded rice is around
IDR13,000-IDR15,000 per kg for medium branded rice and IDR18,500-IDR21,000
per kg for premium branded rice.
The above capped
retail price is almost the same with Buyung Poetra’s (HOKI IJ, NR) ex-factory
price which is around IDR9,500 to IDR10,500 for regular-to-medium branded
rice and around IDR12,500 per kg for premium branded rice. Buyung said that
retailer margin - under the new regulation - will also be capped by maximum
8%, so Buyung’s EBIT margin is likely to be still under pressure.
On our discussion
with Buyung’s management, there are likely two strategies to minimize the
impact of the new capped price:
¨ Buyung
may increase the composition of broken rice in their package. Currently,
broken rice composition for its premium branded rice is below 10%, while for
medium branded rice it is below 20%. Higher broken rice composition may
reduce COGS.
¨ Buyung will focus to
expand sales of special rice, such as “pandan wangi” which is not regulated
by the government. (Andrey Wijaya)
Link
to daily report: Indonesia Morning Cuppa 250817
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Best regards,
Helmy Kristanto
Director
Head of Indonesia Research
PT RHB Sekuritas Indonesia
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