3Q24 results: Within expectations

We believe the overall 3Q24 results were in line with our estimates. Historically, 4Q has contributed around 35-40% to the company's FY profit over the past five years, primarily driven by the annual rebates. While 3Q24 revenue grew strongly by +11% y-y, we estimate Alfamart's Same-Store Sales Growth (SSSG) to be at the lower end of the mid-to-high single-digit range. NPAT growth, at +5% y-y, appears weaker but is primarily due to one-time R&D income recognized in 3Q23 (IDR52bn). Excluding the one-time income, 3Q24 pre-tax profit still grew a respectable +12% y-y.

Although we acknowledge limited operating leverage improvements in 9M24, the company is investing in future efficiencies through additional chiller and cash deposit box machine initiatives. We believe these investments though create some margin pressure, will yield medium-to-long-term benefits for the company’s long-term margin improvement (read A consistent FMCG outperformer).

Ex-Java continues its stellar performance

3Q24 ex-Java sales grew impressively by +17% y-y (contributing 37% to revenue), significantly outpacing Java growth of +7% y-y (contributing 63% to revenue). This disparity likely explains why Alfamidi (MIDI IJ, Buy) outperformed AMRT's revenue growth in 3Q24, at +15% y-y, given Alfamidi's higher Java/Ex-Java split of 52/48. Notably, the Ex-Java region boasts a higher EBIT margin of 6.3% in 9M24 compared to Java's 4.6%. The faster growth in ex-Java underscores the company's focus on expanding further into this region. However, the Java region remains critical for AMRT, as it offers opportunities for higher rebates and operational efficiencies through the massive sales volume that they have.

Maintain Buy with TP of IDR3,830

We maintain our Buy call with TP of IDR3,830, pegged on a 2025F P/E of 33.4x, +1SD above its five-year average. We remain optimistic about AMRT's long-term margin improvement story, driven by industry duopoly and efficiency enhancements. We continue to view AMRT as the best proxy for Indonesia's FMCG-retail sector. Currently, the stock trades at 29x 2025F P/E.

Results recap

● 3Q24 revenue grew to IDR29tn (+11% y-y), bringing 9M24 revenue to IDR88tn (+10% y-y), in line with our/consensus' estimates.

● 3Q24 EBIT expanded +13% y-y to IDR687bn, bringing 9M24 EBIT to IDR2.8tn (+11% y-y), in line with ours but below consensus' estimates.

● 3Q24 NPAT reached IDR605bn (+5% y-y), bringing 9M24 NPAT to IDR2.4tn (+10% y-y), in line with our/consensus estimates.

Fig. 2: Java/Ex-Java quarterly sales y-y growth

Fig. 3: Java/Ex-Java quarterly EBIT margin

Fig. 4: Java/Ex-Java quarterly revenue split

Fig. 5: Java/Ex-Java quarterly EBIT split

Fig. 6: Quarterly revenue (IDR bn)

Fig. 7: Quarterly gross profit (IDR bn)

Fig. 8: Quarterly opex as % of revenue

Fig. 9: Quarterly net profit (IDR bn)

Fig. 10: AMRT P/E band

Fig. 11: Portfolio weighting, AMRT

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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Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)