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Midi Utama Indonesia (MIDI IJ) (Buy) - Recovery in motion

Midi Utama Indonesia (MIDI IJ) (Buy) - Recovery in motion

Retail JW SH SC 238 24th Mar, 2025

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Recovery in motion

Lawson loss peaked in 2024, set to recover in 2025F; maintain Buy with TP of IDR420

4Q24 result miss: larger-than-expected Lawson loss + higher depreciation from stores expansion in 4Q

MIDI’s top line expanded by 15% y-y, driven by strong performance ex-Java (+23% y-y). However, earnings fell short of expectations, primarily due to a larger-than-expected loss from Lawson (unlisted), amounting to IDR236bn (compared to our initial assumption of IDR200bn). We believe this was influenced by higher one-off costs associated with shutting down the store-in-store concept (325 stores) and closing several of the standalone formats (65 stores). Additional operating expense pressure was observed, particularly in depreciation costs, as nearly 40% of Alfamidi’s store openings occurred in 4Q24 alone, contributing to a 20bp y-y increase in 2024. Notably, excluding the Lawson loss, MIDI’s net profit surged impressively by 38% y-y to IDR712bn (Fig. 5).

2025F: Lawson loss recovery and strong ex-Java presence remain main growth drivers

We assume a worst-case scenario in which Lawson closes 200 of its 374 existing stores this year, with an estimated total one-off cost of IDR140bn (Fig. 3), implying a near IDR100bn y-y turnaround (or IDR70bn when adjusted for MIDI’s 70% stake in Lawson). This potential loss recovery alone could contribute 12% to y-y earnings growth for MIDI in 2025F. Meanwhile, we conservatively project Alfamidi’s profit to grow by just 11%, with no margin expansion. As a result, we forecast overall earnings growth of 23% y-y in 2025. We continue to believe that higher growth ex-Java will remain MIDI’s key driver, supported by more favorable soft commodity prices, which would benefit informal sector workers.

Maintain Buy with lower TP of IDR420 (+40% upside)

We downgrade our 2025F-2026F earnings assumptions by 6%/9%, resulting in a lower TP of IDR420 (previously IDR500). This is based on a 20.7x 2025F P/E, representing a 25% discount to our P/E target of 27.6x for Alfamart (AMRT IJ, Buy). The discount reflects MIDI’s 2025F return on equity (ROE) of 15% versus AMRT’s 20%. We remain positive on MIDI given the strong performance of Alfamidi, and its decision to slow the loss-making Lawson business, although we expect one-off costs in the near term. The primary downside risk, in our view, remains a larger-than-expected loss from Lawson’s operations. Currently, the stock trades at a 2025F P/E of 14.9x.

Year-end 31 DecFY24FY25FFY26FFY27F
Currency (IDR)ActualOldNewOldNewOldNew
Revenue (bn)19,88821,07520,91323,34823,222025,723
Reported net profit (bn)5467176718687940954
Normalised net profit (bn)5467176718687940954
FD normalised EPS16.3421.4520.0825.9623.7428.53
FD norm. EPS growth (%)5.816.522.921.018.220.2
FD normalised P/E (x)18.4–14.9–12.6–10.5
EV/EBITDA (x)6.5–5.9–4.8–3.9
Price/book (x)2.4–2.2–1.9–1.7
Dividend yield (%)1.9–2.3–2.8–3.3
ROE (%)13.916.215.417.416.217.3
Net debt/equity (%)net cashnet cashnet cashnet cashnet cashnet cash
Source: Company data, Verdhana estimates

Key data on Midi Utama Indonesia

Income statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Revenue
17,351
19,888
20,913
23,222
25,723
Cost of goods sold
-12,843
-14,656
-15,410
-17,067
-18,857
Gross profit
4,509
5,232
5,503
6,154
6,866
SG&A
-4,084
-4,717
-4,854
-5,347
-5,889
Employee share expense
Operating profit
425
515
649
807
977
EBITDA
1,250
1,502
1,638
1,909
2,189
Depreciation
-825
-987
-989
-1,102
-1,213
Amortisation
EBIT
425
515
649
807
977
Net interest expense
-96
-49
-48
-43
-36
Associates & JCEs
Other income
318
204
206
228
251
Earnings before tax
646
670
807
992
1,192
Income tax
-130
-195
-178
-198
-238
Net profit after tax
516
476
629
794
954
Minority interests
0
71
42
0
0
Other items
Preferred dividends
Normalised NPAT
517
546
671
794
954
Extraordinary items
Reported NPAT
517
546
671
794
954
Dividends
-181
-191
-235
-278
-334
Transfer to reserves
336
355
436
516
620
Valuations and ratios
Reported P/E (x)
19.4
18.4
14.9
12.6
10.5
Normalised P/E (x)
19.4
18.4
14.9
12.6
10.5
FD normalised P/E (x)
19.4
18.4
14.9
12.6
10.5
Dividend yield (%)
1.8
1.9
2.3
2.8
3.3
Price/cashflow (x)
8.1
6.1
6.1
5.2
4.5
Price/book (x)
2.7
2.4
2.2
1.9
1.7
EV/EBITDA (x)
8.0
6.5
5.9
4.8
3.9
EV/EBIT (x)
23.4
19.0
14.9
11.4
8.8
Gross margin (%)
26.0
26.3
26.3
26.5
26.7
EBITDA margin (%)
7.2
7.6
7.8
8.2
8.5
EBIT margin (%)
2.4
2.6
3.1
3.5
3.8
Net margin (%)
3.0
2.7
3.2
3.4
3.7
Effective tax rate (%)
20.1
29.1
22.0
20.0
20.0
Dividend payout (%)
35.0
35.0
35.0
35.0
35.0
ROE (%)
18.0
13.9
15.4
16.2
17.3
ROA (pretax %)
6.1
6.5
7.6
8.8
10.1
Growth (%)
Revenue
11.1
14.6
5.2
11.0
10.8
EBITDA
3.7
20.2
9.1
16.5
14.7
Normalised EPS
29.3
5.8
22.9
18.2
20.2
Normalised FDEPS
29.3
5.8
22.9
18.2
20.2
Source: Company data, Verdhana estimates
Cashflow statement (IDRbn)
Year-end 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
EBITDA
1,250
1,502
1,638
1,909
2,189
Change in working capital
-422
174
18
38
71
Other operating cashflow
408
-31
-4
-26
-32
Cashflow from operations
1,236
1,645
1,652
1,921
2,228
Capital expenditure
-1,356
-1,505
-1,200
-1,238
-1,278
Free cashflow
-120
141
452
683
951
Reduction in investments
0
0
0
0
0
Net acquisitions
0
0
0
0
Dec in other LT assets
-49
-30
-5
-10
-11
Inc in other LT liabilities
125
68
81
25
19
Adjustments
-113
-27
-316
-39
-34
CF after investing acts
-158
152
212
658
925
Cash dividends
-139
-181
-191
-235
-278
Equity issue
1,233
0
0
0
0
Debt issue
-1,503
-63
0
0
0
Convertible debt issue
0
0
0
0
0
Others
477
143
65
37
28
CF from financial acts
68
-101
-126
-198
-250
Net cashflow
-90
51
86
461
675
Beginning cash
417
327
378
464
925
Ending cash
327
378
464
925
1,600
Ending net debt
-264
-378
-464
-925
-1,600
Balance sheet (IDRbn)
As at 31 Dec
FY23
FY24
FY25F
FY26F
FY27F
Cash & equivalents
327
378
464
925
1,600
Marketable securities
0
0
0
0
0
Accounts receivable
430
442
556
545
668
Inventories
2,330
2,701
2,589
3,270
3,203
Other current assets
99
104
104
104
104
Total current assets
3,186
3,626
3,713
4,844
5,575
LT investments
0
0
0
0
0
Fixed assets
4,299
4,776
5,222
5,372
5,453
Goodwill
0
0
0
0
0
Other intangible assets
0
0
0
0
0
Other LT assets
301
331
336
346
357
Total assets
7,786
8,733
9,271
10,563
11,384
Short-term debt
63
0
0
0
0
Accounts payable
2,050
2,342
2,276
2,839
2,812
Other current liabilities
1,250
1,521
1,607
1,752
1,905
Total current liabilities
3,363
3,864
3,883
4,591
4,717
Long-term debt
0
0
0
0
0
Convertible debt
0
0
0
0
0
Other LT liabilities
511
578
659
684
703
Total liabilities
3,874
4,442
4,542
5,275
5,420
Minority interest
173
162
120
120
120
Preferred stock
0
0
0
0
0
Common stock
334
334
334
334
334
Retained earnings
1,987
2,378
2,858
3,416
4,092
Proposed dividends
0
0
0
0
0
Other equity and reserves
1,419
1,417
1,417
1,417
1,417
Total shareholders' equity
3,740
4,129
4,609
5,168
5,844
Total equity & liabilities
7,786
8,733
9,271
10,563
11,384
Liquidity (x)
Current ratio
0.95
0.94
0.96
1.06
1.18
Interest cover
4.4
10.6
13.6
18.8
27.3
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)
15.44
16.34
20.08
23.74
28.53
Norm EPS (IDR)
15.44
16.34
20.08
23.74
28.53
FD norm EPS (IDR)
15.44
16.34
20.08
23.74
28.53
BVPS (IDR)
111.85
123.50
137.86
154.57
174.79
DPS (IDR)
5.41
5.72
7.03
8.31
9.99
Activity (days)
Days receivable
8.7
8.0
8.7
8.7
8.6
Days inventory
61.8
62.8
62.7
62.7
62.7
Days payable
53.5
54.8
54.7
54.7
54.7
Cash cycle
17.0
16.0
16.7
16.6
16.6
Source: Company data, Verdhana estimates
Company profilePT. Midi Utama Indonesia Tbk (MIDI) is engaged in the general trading which includes business in supermarket and mini market. The main business of the Company is in retail of consumer products through minimarkert network known as “Alfamidi” and “Alfaexpress” which started its commercial operation in 2007.
Valuation MethodologyOur target price of IDR420 is based on a 20.7x 2025F P/E, representing a 25% discount to AMRT's 2025F P/E target of 27.6x. The discount reflects MIDI's 2025F ROE of 15% compared to AMRT's 20%.Benchmark index is JCI.
Risks that may impede the achievement of the target priceThe primary downside risk remains a larger-than-expected loss from Lawson’s operations.
ESGAs a public company, the Company is committed to consistently improving the quality of Good Corporate Governance (GCG) practices in all aspects of the Company. Mechanisms and coordination between GCG organs continue to be improved, including by measuring the quality of GCG implementation independently or self-assessment, which the results serve as the basis for analyzing the strengths and weaknesses of GCG practices in the Company to provide recommendations and improvement steps in the coming year.

Fig. 1: MIDI 2024 results recap

MIDI IJ   QoQYoY  YoY12M24/12M24/
Profit and loss statement (IDRbn)4Q233Q244Q24(%)(%)12M2312M24(%)NmrCons
Revenue       4,427       4,902       5,202      6.1     17.5    17,351    19,888         14.6100.5%100.8%
COGS       3,283       3,591       3,876       7.9     18.1    12,843    14,656         14.1  
Gross profit       1,144       1,311       1,326      1.1     15.9       4,509       5,232         16.1  
EBIT (Incl. fee based)          102          155            79   (49.2)    (22.7)          500          597         19.489.0%90.5%
Net interest income/(expense)           (13)           (12)           (13)     (5.2)        0.6           (96)           (49)         49.3  
R&D income            47             -               -   na.   (100.0)          135            10       (92.6)  
Other income (expense)            88            49            52       5.3    (40.7)          318          204       (35.8)  
Pre-tax profit          157          171            97   (43.3)    (38.2)          646          670           3.7  
Net profit          126          142            80   (44.0)    (36.9)          517          546           5.888.7%89.0%
           
Gross margin (%)        25.8        26.7        25.5          26.0        26.3   
EBIT margin (%)          2.3          3.2          1.5            2.9          3.0   
Pre-tax margin (%)          3.6          3.5          1.9            3.7          3.4   
Net margin (%)          2.8          2.9          1.5            3.0          2.7   
           
Balance sheet (IDRbn)Dec-23Sep-24Dec-24       
Cash and equivalents          327          308          378       
Total assets       7,786       8,376       8,733       
Total liabilities       3,874       4,135       4,442       
Interest bearing liabilities            63             -               -         
Equity       3,912       4,241       4,291       
           
ROA (%)          6.5          6.8          3.6       
ROE (%)        12.9        13.4          7.4       
Gearing (%)          1.6             -               -         
Net gearing (%) n.c.  n.c.  n.c.        
Note:  Consensus is using Bloomberg consensus estimates.
Source: Company data, Verdhana estimates

 

Fig. 2: Earnings estimate changes

Source: Company data, Verdhana estimates

 

Fig. 3: One-off costs assumption for Lawson standalone

 Costs (IDRmn)Remarks
Estimated breakdown of Capex/standalone store  
Rent (5 years)                   1,0003 years paid upfront (IDR600mn)
Lawson equipment                      500equals to Lawson SIS capex
Other equipment                      500Racks, cashier, etc
Total Capex/standalone store                   2,000 
Estimated one-off/standalone store  
Rent (1 yr left)                      200Not extending the other 2 years
Lawson equipment                      500Scrapped
Other equipment                         -  Can be use for other Alfamart stores
Total one-off cost/standalone store                      700Loss per stores
Total Lawson standalone one-off              140,000Assumption of 200 store closures
Source: Company data, Verdhana estimates

 

Fig. 4: Lawson excl. R&D income fee quarterly NPAT (IDRbn)

Source: Company data, Verdhana research
Fig. 5: Alfamidi-only NPAT (excl. Lawson, in IDRbn)

Source: Company data, Verdhana research

 

Fig. 6: MIDI P/E band

Source: Bloomberg Finance L.P., Verdhana estimates

 

Fig. 7: MIDI quarterly revenue

Source: Company data, Verdhana research
Fig. 8: MIDI quarterly gross profit

Source: Company data, Verdhana research

 

Fig. 9: MIDI quarterly opex as percentage to sales

Source: Company data, Verdhana research
Fig. 10: MIDI quarterly net 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 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.


This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

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.


RESTRICTIONS ON DISTRIBUTION

By accepting this report, the recipient hereof represents and warrants that you are entitled to receive such report in accordance with the restrictions and agrees to be bound by the limitations contained herein. Neither this report nor any copy hereof may be distributed except in compliance with applicable Indonesian capital market laws and regulations. 

Rating Table

Rating
Remains
Buy
Target price
Reduced from IDR 500
IDR 420
Closing price
21 March 2025
IDR 300
Implied upside+40.0%
Market Cap (USD mn)608.1
ADT (USD mn)0.2

Relative performance chart



Source: LSEG, Verdhana
M cap (USDmn)
608.1
Free float (%)
16.0
3-mth ADT (USDmn)
0.2
(%)
1M
3M
12M
Absolute (IDR)
-21.9
-28.6
-28.6
Absolute (USD)
-22.8
-29.9
-32.2
Rel to Jakarta Stock Exchange Composite Index
-13.9
-18.2
-13.9

Research Analysts

Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)

Tags: RETAIL, MIDI, MIDI JK, MIDI IJ, Jody Wijaya, Sandy Ham, Samuel Christian
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