BNP ASEAN conf: Indofood

* Indofood has raised prices on instant noodles by IDR100/pack or around 7-10%. This is in response to a only a 5% price increase in flour and CPO prices in the 4Q10, hence currently all of the price increase in raw materials have been passed on to customers and still gives buffer to further price increase in input costs.

* For every 1% of wheat and CPO price increase, instant noodles' EBIT margin decline by 35 bps. Meanwhile for every 1% increase in instant noodle's selling price, EBIT margin expands by 70 bps.

* in light of the continued rise in wheat prices, Bogasari is likely to experience margins contraction or normalizaton to around the 9-11% vs. 15% in the 9M10 since Bogasari is switching their strategy from margins focus to market share focus (at the expense of margins).

* The price increase is proof that Indofood does have pricing power and given every single companies are facing the same pressure rising soft commodity prices, we expect competitors to follow Indofood's move. The last time Indofood raise prices, competitors followed in a matter of days, as such we do not expect this to affect volumes especially since rice prices (substitute for instant noodles) have increased by the same percentage, implying that there is no shift in competitiveness.