We attended Gaikindo Jakarta Auto Week (GJAW) on 25 November 2024. GJAW 2024, as the third automotive expo this year, underscored the changing dynamics of Indonesia’s automotive landscape — with more new players coming to Indonesia. Aggressive price wars, with discounts up to IDR 70mn and more new models in the expo, heighten the competition in the sector.  

Newcomers steal the show 

GJAW 2024 is highly robust for new entrants, particularly in EV and MPV segments. Aletra (unlisted) launched the 7-seat electric MPV L8 (see Fig. 2), co-developed with Geely's (175 HK, Not rated) Livan Auto, which is positioned directly against BYD’s (1211 HK, Buy) M6. With advanced features, including spacious interiors, L8 EV offers an affordable electric drive. Zeekr (ZK US, Not rated) made its mark with the Zeekr 009 (see Fig. 3), a full-size luxury MPV, and the Zeekr X, a sub-compact electric SUV that targets urban commuters, fashionably and sportingly. Maxus (unlisted) launched two premium 7-seater MPVs with its Mifa 7 and Mifa 9.

Competition heightens — and high price war

Attention, meanwhile, shifted to the new kids on the block, even as Toyota (7203 JP, Neutral) and Honda (7267 JP, Buy) still maintained very strong positions. This underlines the challenge legacy players have to face to remain relevant as consumer preferences evolve towards affordability, innovation, and electric mobility. Price wars dominated the event, with discounts of up to IDR70mn for some models. Such aggressive strategies will undoubtedly drive sales, but they raise questions about long-term profitability and sustainability. The increasing competition within the mid-range segment also highlights the fight over market share as brands try to draw consumers’ interest.

Closer to the bottom is likely... prefer companies with agnostic nature

We think the downtrading theme will still continue until the government could provide incentives to the sector, although we think the downturn is closer to the bottom. Our top picks include Adi Sarana Armada Tbk PT (ASSA IJ), Astra Otoparts Tbk PT (AUTO IJ), Dharma Polimetal TbK PT (DRMA IJ), Selamat Sempurna Tbk PT (SMSM IJ), and Mitra Pinasthika Mustika Tbk PT (MPMX IJ) (all rated Buy).

• ASSA TP of IDR1,200/share is derived using an SOTP valuation, implying a FY24F P/E of 10x.
• AUTO TP of IDR 2,900 is based on DCF valuation, with WACC of 10.8% and a terminal growth rate of 2.0%. At our TP, AUTO would trade at a 2024F P/E of 7.3x.
• DRMA TP of IDR1,800 is based on DCF valuation, with WACC of 7.6% and a terminal growth rate of 2.5%. At our TP, the stock would trade at a 2024F P/E of 14.2x.
• SMSM TP is at IDR 2,500 based on DCF valuation with a WACC of 10.7% and terminal growth rate of 2.0%. At our TP, SMSM would trade at 14.2x FY24F P/E.
• MPMX TP of IDR1,450 is based on DCF methodology, assuming a WACC of 12% and a terminal growth rate of 2.5%.

Fig. 1: GJAW 2024

Fig. 2: Aletra L8

Fig. 3: Zeekr 009

Fig. 4: Price of Incumbent and EV — 7 seaters

Fig. 5: Sales of Toyota Avanza and Toyota Veloz

Fig. 6: Sales of Toyota Innova and Toyota Zenix

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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Jupriadi Tan (jupriadi.tan@verdhana.id) 

Gerald Hugo (gerald.hugo@verdhana.id)