BBRI has released its YTD Oct-24 results with PPOP and net profit of IDR89.5tr (+15% y-y) and IDR45.7tr (+5% y-y), respectively. On a m-m basis, headline PPOP and net profit were IDR8.5tn (-11% m-m) and IDR4.1tn (-26% m-m).

Credit costs (CoC) remained elevated for YTD Oct-24 at 3.2% (+60bp y-y) as write-off trends remained steady, while we also think that the bank may still have some downgrades for its mass-market loan portfolios. We do not anticipate provision releases in the remaining months of 2024. Thus, we think LLR should hover around 6.2%.

While we think the bank may have to do more write-offs in 2025, we think earnings risks should be manageable as we do not see a worsening of macroeconomic trends. Management has also slowed down loan disbursements to micro segments. At the same time, of late, we have seen some improvement in (micro) deposit growth in 3Q24 whereby micro LDR has improved.

We therefore retain our Buy rating on the stock.

Valuation and risks

Our TP of IDR6,300 is based on a DuPont analysis with a risk-free rate of 6.5%, an equity risk premium of 7.8%, growth of 10.0%, beta 0.8x, and a CAR-adjusted ROAE of 18.0%. We have also used 2025F book as reference. The implied multiples at our TP would be 2.9x 2025F book and 14.8x 2025F earnings (compared to current multiples of 2.1x and 11.1x, respectively). The key risks to our view are worsening of macroeconomic trends, unfavorable regulatory changes, and tighter liquidity competition, which could increase funding costs, worsening credit quality which would raise credit costs, and higher opex.

Fig. 1: BBRI –YTD Oct-24 results

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. 

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Nicholas Santoso (nicholas.santoso@verdhana.id)

Erwin Wijaya (erwin.wijaya@verdhana.id)