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AKR Corporindo (AKRA IJ) (Buy) - Resilient logistics and JIIPE support earnings

AKR Corporindo (AKRA IJ) (Buy) - Resilient logistics and JIIPE support earnings

Plantation JT DT GH 127 17th Apr, 2025

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Resilient logistics and JIIPE support earnings

Maintain Buy and TP of IDR1,700

AKRA’s logistics and estate moat remains robust, in our view, supporting its earnings stability despite a soft macro backdrop. The expansion in tank storage and pick-up in utilities point to its improved cost efficiency. The strategic positioning at JIIPE (Java Integrated Industrial and Port Estate, unlisted) ensures AKRA’s relevance in Indonesia’s long-term industrial and commodity supply chain story. We maintain our Buy rating and TP of IDR1,700.

Fuel logistics remain resilient

AKRA’s fuel stations (BP) are witnessing increased traffic, potentially on consumer concerns about fuel quality at competing outlets; this, we believe, strengthens recurring income and validates AKRA’s retail expansion strategy. Its strategy to raise tank capacity by +10%/±200KL by 2025F could increase volumes and efficiency. The government’s target to reduce subsidy may also present an opportunity for AKRA to supply to the previously subsidized market.

JIIPE’s strategic location supports commodity-linked demand

JIIPE remains a key differentiator for AKRA, attracting downstream players in metals, energy, and logistics due to its proximity to ports and infrastructure readiness, as it makes tenants’ inbound/outbound logistics move efficiently. We view JIIPE as a strategic hub for East Java’s industrial growth; we see JIIPE recording 80ha of annual land sales in 2025F (38ha in FY24).

Utilities business gaining momentum (6-7% of GP in FY25F vs 0% in FY24)

Utilities revenues and margins have improved due to rising occupancy and demand within JIIPE. We expect this segment (including water and power) to deliver stronger recurring income, leveraging captive demand from tenants. The rising contribution from utilities also reduces earnings volatility, strengthening the quality of AKRA’s earnings mix, in our view.

Valuation appears attractive – maintain Buy and TP of IDR1,700

We expect AKRA's strong moat in distribution/industrial estate to provide growth. The recent share purchases by management indicate its strong confidence in the company’s long-term outlook. AKRA trades at an attractive valuation of 8.2x 2025F P/E with ROE of 22.1% – at -1.5SD of its historical PE/ROE average. Our SOTP-based TP of IDR1,700 is derived using: 9x FY25F P/E for the trading and distribution business, DCF valuation (10% WACC, 1% terminal growth) for manufacturing, logistics/ utilities, and a 30% discount to NAV for industrial estate. Downside risks: 1) lower-than-expected volume for its trading and distribution business, and 2) unfavorable dynamics, with significant oil supply and lower commodity prices.


Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
Revenue (bn)38,72940,92741,38144,08344,538045,628
Reported net profit (bn)2,2252,5652,6162,9943,03203,240
Normalised net profit (bn)2,2252,5652,6162,9943,03203,240
FD normalised EPS110.85127.80130.32151.67153.60161.43
FD norm. EPS growth (%)-20.519.317.618.717.95.1
FD normalised P/E (x)9.7–8.2–7.0–6.7
EV/EBITDA (x)8.2–5.5–4.4–4.2
Price/book (x)1.8–1.8–1.6–1.5
Dividend yield (%)11.6–7.4–8.4–9.0
ROE (%)19.521.022.122.523.823.2
Net debt/equity (%)net cashnet cashnet cashnet cashnet cashnet cash
Source: Company data, Verdhana estimates

Key data on AKR Corporindo

Income statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Revenue
42,087
38,729
41,381
44,538
45,628
Cost of goods sold
-37,613
-35,220
-37,385
-39,994
-40,796
Gross profit
4,473
3,509
3,996
4,544
4,832
SG&A
-823
-931
-848
-913
-935
Employee share expense
Operating profit
3,651
2,578
3,148
3,631
3,896
EBITDA
3,841
2,976
3,626
4,167
4,487
Depreciation
-190
-397
-478
-536
-591
Amortisation
EBIT
3,651
2,578
3,148
3,631
3,896
Net interest expense
128
268
122
158
154
Associates & JCEs
Other income
-91
-7
0
0
0
Earnings before tax
3,687
2,839
3,270
3,789
4,051
Income tax
-589
-439
-491
-568
-608
Net profit after tax
3,098
2,399
2,780
3,221
3,443
Minority interests
-298
-174
-164
-189
-203
Other items
Preferred dividends
Normalised NPAT
2,800
2,225
2,616
3,032
3,240
Extraordinary items
Reported NPAT
2,800
2,225
2,616
3,032
3,240
Dividends
-2,467
-2,467
-1,570
-1,819
-1,944
Transfer to reserves
333
-242
1,046
1,213
1,296
Valuations and ratios
Reported P/E (x)
7.6
9.5
8.1
7.0
6.7
Normalised P/E (x)
7.6
9.5
8.1
7.0
6.7
FD normalised P/E (x)
7.7
9.7
8.2
7.0
6.7
Dividend yield (%)
11.6
11.6
7.4
8.4
9.0
Price/cashflow (x)
6.2
16.0
2.9
4.9
8.4
Price/book (x)
1.9
1.8
1.8
1.6
1.5
EV/EBITDA (x)
5.8
8.2
5.5
4.4
4.2
EV/EBIT (x)
6.1
9.5
6.3
5.1
4.8
Gross margin (%)
10.6
9.1
9.7
10.2
10.6
EBITDA margin (%)
9.1
7.7
8.8
9.4
9.8
EBIT margin (%)
8.7
6.7
7.6
8.2
8.5
Net margin (%)
6.7
5.7
6.3
6.8
7.1
Effective tax rate (%)
16.0
15.5
15.0
15.0
15.0
Dividend payout (%)
88.1
110.9
60.0
60.0
60.0
ROE (%)
25.2
19.5
22.1
23.8
23.2
ROA (pretax %)
15.7
10.0
11.8
13.7
13.9
Growth (%)
Revenue
-11.5
-8.0
6.8
7.6
2.4
EBITDA
10.4
-22.5
21.8
14.9
7.7
Normalised EPS
15.1
-20.5
17.6
15.9
5.1
Normalised FDEPS
15.1
-20.5
17.6
17.9
5.1
Source: Company data, Verdhana estimates
Cashflow statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
EBITDA
3,841
2,976
3,626
4,167
4,487
Change in working capital
5,588
-3,179
4,430
764
-1,277
Other operating cashflow
-5,926
1,550
-532
-600
-656
Cashflow from operations
3,502
1,347
7,524
4,331
2,554
Capital expenditure
-660
-1,296
-1,188
-1,098
-1,019
Free cashflow
2,842
51
6,336
3,233
1,535
Reduction in investments
-29
-46
0
0
0
Net acquisitions
Dec in other LT assets
0
Inc in other LT liabilities
0
Adjustments
33
296
0
0
0
CF after investing acts
2,846
300
6,336
3,233
1,535
Cash dividends
-2,467
-1,974
-1,570
-1,819
-1,944
Equity issue
Debt issue
1,584
724
0
0
0
Convertible debt issue
Others
235
-220
-596
392
197
CF from financial acts
-648
-1,470
-2,165
-1,427
-1,747
Net cashflow
2,198
-1,170
4,171
1,805
-212
Beginning cash
4,338
6,536
5,366
9,537
11,342
Ending cash
6,536
5,366
9,537
11,342
11,130
Ending net debt
-1,987
-94
-4,265
-6,070
-5,858
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash & equivalents
6,536
5,366
9,537
11,342
11,130
Marketable securities
Accounts receivable
6,460
7,608
7,179
8,172
8,828
Inventories
4,754
7,220
4,726
5,055
5,157
Other current assets
371
805
805
805
805
Total current assets
18,121
20,998
22,246
25,374
25,920
LT investments
446
492
492
492
492
Fixed assets
5,466
6,365
7,075
7,638
8,066
Goodwill
Other intangible assets
Other LT assets
6,221
5,253
5,253
5,253
5,253
Total assets
30,255
33,109
35,066
38,758
39,732
Short-term debt
1,094
1,148
1,148
1,148
1,148
Accounts payable
10,361
11,203
12,711
14,798
14,279
Other current liabilities
1,078
1,103
1,103
1,103
1,103
Total current liabilities
12,533
13,454
14,962
17,048
16,529
Long-term debt
3,454
4,124
4,124
4,124
4,124
Convertible debt
Other LT liabilities
224
906
1,403
1,403
1,403
Total liabilities
16,212
18,485
20,489
22,575
22,056
Minority interest
2,780
3,061
2,466
2,857
3,054
Preferred stock
Common stock
1,689
1,689
1,689
1,689
1,689
Retained earnings
9,397
9,651
10,201
11,414
12,710
Proposed dividends
Other equity and reserves
177
223
223
223
223
Total shareholders' equity
11,263
11,563
12,112
13,325
14,621
Total equity & liabilities
30,255
33,109
35,066
38,758
39,732
Liquidity (x)
Current ratio
1.45
1.56
1.49
1.49
1.57
Interest cover
–
–
–
–
–
Leverage
Net debt/EBITDA (x)
net cash
net cash
net cash
net cash
net cash
Net debt/equity (%)
net cash
net cash
net cash
net cash
net cash
Per share
Reported EPS (IDR)
141.87
112.74
132.54
153.60
161.43
Norm EPS (IDR)
141.87
112.74
132.54
153.60
161.43
FD norm EPS (IDR)
139.50
110.85
130.32
153.60
161.43
BVPS (IDR)
570.63
585.83
613.68
663.81
728.38
DPS (IDR)
125.00
125.00
79.53
90.61
96.86
Activity (days)
Days receivable
54.3
66.5
65.2
62.9
68.0
Days inventory
48.5
62.2
58.3
44.6
45.7
Days payable
97.4
112.0
116.7
125.5
130.1
Cash cycle
5.4
16.6
6.8
-18.0
-16.4
Source: Company data, Verdhana estimates
Company profileAKRA was established in 1960, in 1977 the firm is formally incorporate under the name “Aneka Kimia Raya”. AKRA engages in 4 business segments: 1) Trading and distribution of petroleum and basic chemicals 2) Industrial estate -- in Java Integrated Industrial and Ports Estate (JIIPE) located in Gresik, West Java, Indonesia. 3) Logistic services. 4) Manufacturing segment
Valuation MethodologyAKRA's TP of IDR1,700 is derived from SOTP methodology. For it's trading and distribution business, we value it using target P/E of 9x. For its manufacturing & logistics and utilities business are valued using DCF with a WACC of 10%. It's industrial estate business is valued using discount to NAV of 30%. The benchmark for the stock is JCI.
Risks that may impede the achievement of the target priceDownside risks to our call include: 1) lower-than-expected volume for its trading & distribution business; 2) unfavorable dynamics, with abundant oil supply and lower commodity prices; 3) lower-than-expected ASP for its chemical business; and 4) delayed customer acquisition strategy for JIIPE.
ESGThe implementation of ESG aspects moved towards the initiation strategy for the development of a cleaner energy business (JV Gas Distribution). AKRA’s shares in 2021 were included in various well-known ESG Indexes: 1) ESG Leader Index, 2) Sri Kehati Index, 3) ESG Starlist Company, 4) ESG Quality 45 IDX KEHATI. AKRA's best ESG practices can be seen in its health & safety (12.565.738 hours without incident in 2021), opportunity equality (43% director level, 21% management level), and 0 environment complaint in 2021.

Fig. 1: AKRA’s shareholders have bought up to 6.5% of the company since 2019

Source: Bloomberg Finance L.P., Verdhana research

 

Fig. 2: AKRA’s annual land sales – Land sales picking up in 2025

Source: Company data, Verdhana research

 

Fig. 3: AKRA’s profit – tailwinds ahead with improved ROE%

Source: Company data, Verdhana estimates

 

Fig. 4: AKRA gross profit

Source: Company data, Verdhana research

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

GENERAL DISCLOSURE/DISCLAIMER 
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ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


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Rating Table

Rating
Remains
Buy
Target price
Remains
IDR 1,700
Closing price
14 April 2025
IDR 1,075
Implied upside+58.1%
Market Cap (USD mn)1,286.8
ADT (USD mn)1.5

Relative performance chart



Source: LSEG, Verdhana
M cap (USDmn)
1,286.8
Free float (%)
38.7
3-mth ADT (USDmn)
1.5
(%)
1M
3M
12M
Absolute (IDR)
-5.7
-11.2
-38.0
Absolute (USD)
-8.1
-13.9
-41.5
Rel to Jakarta Stock Exchange Composite Index
-3.4
-2.7
-25.4

Research Analysts

Jupriadi Tan (jupriadi.tan@verdhana.id)

David Tjahjadi (david.tjahjadi@verdhana.id)

Gerald Hugo (gerald.hugo@verdhana.id)

Tags: POWER AND UTILITIES, AKRA, AKRA JK, AKRA IJ, Jupriadi Tan, David Tjahjadi, Gerald Hugo
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