Company Coverage
Kalbe Farma (KLBF IJ): Growth Muted By Margin Headwinds
BUY (Maintained)
Current price:
Target price:
Upside:
Rp705
Rp1,100
+56%
Analyst
Analyst
Highlights
- Revenue growth should remain resilient, while bottom line comes under pressure as margin headwinds build from 2Q26.
- Following the 41.5% YTD correction, much of the downside appears priced in, with long-term growth initiatives and a higher-value product mix supporting gradual re-rating.
- Maintain BUY with a lower target price of Rp1,100.
Analysis
- 2Q26 top-line expected to remain in line. Based on our recent meeting with Kalbe Farma (KLBF), 2Q26 revenue growth is expected to remain intact, with yoy growth tracking a similar pace to 1Q26 (+9.4%) and remaining within its 2026 guidance of 8-10%. Growth should continue to be driven by the prescription pharma and distribution segments, while the consumer health and nutrition businesses remain soft amid weak purchasing power. Meanwhile, the pharma business remains relatively less price-sensitive, although demand for generic drugs under the BPJS programme has moderated, the branded generics and specialty segments remain resilient. Export sales (8% to sales) are also expected to remain robust, with management guiding for double-digit growth. 1Q26 revenue contribution was 27% for prescription pharma, 14% consumer health, 22% nutritionals and 36% distribution and logistics. The 9.4% 1Q26 revenue growth was mainly driven by distribution and logistics.
- However, margin pressure will build from 2Q26 and intensify in 3Q26. We expect margin pressure to become evident from 2Q26, primarily due to rupiah depreciation, as 30% of COGS comprises raw materials, which are primarily US dollar-denominated. Margin pressure should intensify further in 3Q26 as the cost increase of about 30% in oil-linked Active Pharmaceutical Ingredient (API) (~15% to COGS) begins to be reflected. Although the company has partially offset rising input costs by raising ASP by 3-5% on selected products across its consumer health and nutrition portfolio, pricing remains constrained in the prescription pharma segment due to budget pressure in the BPJS channel, limiting its ability to fully pass through higher costs. We expect 2026 gross margin to decline to 37.5% (from 39.8% in 2025).
Highlights
- Revenue growth should remain resilient, while bottom line comes under pressure as margin headwinds build from 2Q26.
- Following the 41.5% YTD correction, much of the downside appears priced in, with long-term growth initiatives and a higher-value product mix supporting gradual re-rating.
- Maintain BUY with a lower target price of Rp1,100.
Analysis
- 2Q26 top-line expected to remain in line. Based on our recent meeting with Kalbe Farma (KLBF), 2Q26 revenue growth is expected to remain intact, with yoy growth tracking a similar pace to 1Q26 (+9.4%) and remaining within its 2026 guidance of 8-10%. Growth should continue to be driven by the prescription pharma and distribution segments, while the consumer health and nutrition businesses remain soft amid weak purchasing power. Meanwhile, the pharma business remains relatively less price-sensitive, although demand for generic drugs under the BPJS programme has moderated, the branded generics and specialty segments remain resilient. Export sales (8% to sales) are also expected to remain robust, with management guiding for double-digit growth. 1Q26 revenue contribution was 27% for prescription pharma, 14% consumer health, 22% nutritionals and 36% distribution and logistics. The 9.4% 1Q26 revenue growth was mainly driven by distribution and logistics.
- However, margin pressure will build from 2Q26 and intensify in 3Q26. We expect margin pressure to become evident from 2Q26, primarily due to rupiah depreciation, as 30% of COGS comprises raw materials, which are primarily US dollar-denominated. Margin pressure should intensify further in 3Q26 as the cost increase of about 30% in oil-linked Active Pharmaceutical Ingredient (API) (~15% to COGS) begins to be reflected. Although the company has partially offset rising input costs by raising ASP by 3-5% on selected products across its consumer health and nutrition portfolio, pricing remains constrained in the prescription pharma segment due to budget pressure in the BPJS channel, limiting its ability to fully pass through higher costs. We expect 2026 gross margin to decline to 37.5% (from 39.8% in 2025).
BUY (Maintained)
Current price:
Target price:
Upside:
Rp705
Rp1,100
+56%
Analyst
Analyst
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