We compile Indonesia equities’ 9M24 results and provide a bottom-up assessment of which ones were above/in-line/below Bloomberg consensus estimates. Indeed, our consolidated calculations suggest that 9M24 revenue growth was +5% y-y. Consolidated profit, however, only grew +2% y-y. We continue to favor FMCGs as our sector top pick given solid revenues and net profit growth. For other sectors, we prefer to analyze through the bottom-up appraisal and see how they’ve performed to find value picks.
Revenue and profit recap — margin squeeze/fighting for market share?
Revenues: Sectors that have the highest revenue growth include FMCGs (excluding UNVR IJ [Reduce]), retailers, hospitals, and logistics.
Net profit: Sectors that deliver strong net profit growth include FMCGs, logistics, retailers, and properties. We view that the reason why net profit growth wasn’t as strong as revenue growth is due to companies experiencing margin squeeze or sacrificing margins to win market share.
Given the weak purchasing power in the country, we do not rule out the possibility of a government stimulus for the mid- and low-income segment and thus could provide a potential upside for FMCGs.
Outlook — still weak purchasing power
We view the purchasing power in Indonesia as still weak — and thus may need a booster from the government. Indeed, Indonesia GDP growth in the 3Q24 at 4.95% was below consensus and — lowest since 3Q23 and below the psychological level of 5%.
Stock pick — picking winners
As discussed in our previous anchor report pulse check, we evaluate the country’s purchasing power and conclude that there are areas of both stability and vulnerability. As such, from a stock-picking perspective, we continue to favor winners from each sector through a bottom-up analysis. Our top picks among large caps such as BBCA, AMRT, MYOR, ICBP, HEAL, NCKL (all rated Buy), while for small-mid caps we favor CLEO, ASSA, MIDI (all rated Buy).
Fig. 15: Coal and metal mining revenue growth – quarterly trend
Source: Bloomberg Finance L.P., Verdhana research
Fig. 16: Properties – revenue growth trend on quarterly basis
Source: Bloomberg Finance L.P., 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.
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