Jakarta, CNBC Indonesia – Defensive stocks in the consumer sector are often referred to as stocks that benefit when the Rupiah weakens against the United States (US) Dollar, this is due to sales of their products abroad. However, be aware that this does not mean that all consumer stocks are worth collecting.
When a company receives income in the form of US Dollars, indirectly, when the US Dollar strengthens against the Rupiah, the company's income can certainly increase.
This is different with companies whose raw materials for their products are obtained from abroad. The burden on companies that have to import raw materials will certainly increase, and this will have the effect of shrinking the company's gross profit.
However, can an issuer be declared superior only in revenues dominated by US Dollars? So that you don't choose the wrong stock, it would be good to pay attention to the case examples below.
Looking at the comparison of domestic vs export sales
To see which consumer stocks benefit when the US Dollar strengthens, as an example case you can compare the sales of PT Mayora Indah Tbk (MYOR), and PT Indofood CBP Sukses Makmur Tbk (ICBP).
These two companies produce food and beverages, and sell their products at home and abroad.
From the 2023 annual report data of the two issuers above, it is clear that MYOR is an issuer with greater export sales than ICBP.
With the weakening of the Rupiah against the US Dollar, MYOR's potential to gain profits is certainly greater than its two rival companies. This is because 43% of MYOR's total sales are exports.
Get to know the components of production costs
Even though these two companies both produce food, also get to know the origin of the raw materials they use.
As stated in ICBP's 2023 Annual Report, it is also stated that there is a risk in the price of commodities which are the raw materials for making their products. Call it flour, cooking oil, and skim milk powder.
Data from Trading Economics shows that the price of wheat, which is the raw material for making flour, is strengthening monthly by 4.48% from March to April 2024.
Fluctuations in commodity prices can certainly affect production costs which in turn can have an impact on company performance. To be aware of this, ICBP is forced to periodically adjust product selling prices.
Also pay attention to the denomination of long-term debt
Once you have a good understanding of the company's sales according to its regional segmentation, don't ignore its long-term debt.
Based on financial reports until the end of 2023, ICBP has long-term bond debt denominated in US dollars reaching IDR 42.12 trillion. This value represents 73.69% of the company's total liabilities amounting to IDR 57.16 trillion.
Meanwhile, most of MYOR's long-term bank debt, amounting to IDR 1.7 trillion, is mostly denominated in Rupiah, and only a small portion is denominated in Peso. All of MYOR's long-term bond debt, amounting to IDR 1.8 trillion, is also denominated in Rupiah
In terms of long-term debt, when the Rupiah weakens, MYOR can certainly still handle its debt burden more easily than ICBP.
Disclaimer: This article is a journalistic product in the form of views of CNBC Indonesia Research & Financial Expert. This analysis does not aim to encourage readers to buy, hold, or sell related investment products or sectors. The decision is entirely up to the reader, so we are not responsible for any losses or profits arising from this decision.
[Gambas:Video CNBC]
Next Article
RI Capital Attracts Investment in Debt Securities & Stock Market 2024
(aak/aak)