We anticipate limited upside surprises in the retailers’ 4Q24F results, with the possible exceptions of Erajaya Swasembada (ERAA IJ, Buy) and Mitra Adiperkasa (MAPI IJ, Buy). Looking ahead to 2025F, we maintain a positive outlook on the consumer sector, supported by a higher minimum wage hike of +6.5% y-y (compared to the five-year average of ~5%), fiscal stimulus spending of IDR39tn (0.2% of GDP), and the rollout of the government’s nutritious meal program. We expect these triple stimuli to boost purchasing power.

Sumber Alfaria Trijaya (AMRT IJ, Buy) remains our top pick as Indonesia's best consumer proxy. We also favor MAP Active (MAPA IJ, Buy) due to its highest revenue growth potential and margin expansion opportunities. Aspirasi Hidup Indonesia (ACES IJ, Buy) is attractive given its more aggressive new store opening strategy, particularly in higher-margin ex-Java locations. Midi Utama Indonesia (MIDI IJ, Buy) is also appealing due to the anticipated earnings growth boost from Lawson's loss recovery.

For ACES, we expect limited surprises in 4Q24F results, as average monthly indicative sales in the 4Q24 were already at ~10% y-y. ACES booked a one-off cost of ~IDR30bn related to Rupa-rupa (e-commerce) and corporate tax adjustments from 22% (9M24) to 19% for 2024F, which will be adjusted following the cancellation of the company's treasury shares in the quarter. However, we believe these factors are already factored into consensus earnings estimates. Looking forward to 2025F, we see strong top-line growth potential for ACES, driven by its higher new store opening target (Fig. 3 and 4), especially in higher-margin ex-Java locations.

For AMRT, we expect overall 2024F SSSG remained around mid-single-digit growth, while operating leverage is likely to have been muted due to investments in additional chillers, cash deposit machines, and four new distribution centers opening (DCs) during the year. While these investments may create short-term margin pressure, we believe they will ultimately improve sales productivity and operational efficiency in the medium to longer term. We still project 10% y-y sales growth for Alfamart in 2025F, though we anticipate a minor impact from the Lawson closure. Opex pressure may persist in 2025F due to the higher-than-expected minimum wage increase, increased depreciation expense from the new DCs (four in 2024 and two in 2025F), and ongoing cash deposit machine investments. Despite these investments, we expect earnings growth to at least keep pace with top-line growth.

For ERAA, the unavailability of new iPhone 16 models negatively impacted ERAA's 4Q performance, in our view, as new iPhone models typically generate high product turnover and margins. Consequently, we expect ERAA to have experienced 56% y-y negative earnings growth in 4Q24F. While uncertainty surrounding iPhone 16 sales presents a downside risk to ERAA's earnings, we note the encouraging progress of its new businesses (Fig 5). In the medium to longer term, we believe these initiatives will eventually help improve ERAA's overall profitability margin.

We project strong top-line growth for MAPA in 2024F, with opex recovery in overseas operations continuing in 4Q24F. MAPA remains the Indonesian retailer with the highest revenue growth potential, as we expect the company to add 300-400 new stores and deliver mid-single-digit SSSG. We believe MAPA will see y-y operating margin improvement from a lower base last year, primarily driven by margin recovery in overseas businesses, which began in 2Q24.

Despite MAPA's potential for strong results, we anticipate different outcomes for MAPI's 4Q24F results due to underperformance at Starbucks (SBUX US, Not rated) and Digimap (unlisted). We expect heightened competition in the coffee space to persist next year. Uncertainties surrounding the iPhone 16 ban will also continue to negatively impact Digimap's performance.

As for MIDI, Alfamidi's performance remains solid, with 4Q24 SSSG reaching 9% y-y. We also expect Lawson's losses to recover q-q from the peak of IDR70bn in 3Q24. However, some opex pressure is expected in 4Q24F as approximately one-third of the 203 stores opened in 2024 were opened in the 4Q, along with the addition of one DC. MIDI's 2025F revenue growth may appear weak due to the Lawson store closures. We still believe Alfamidi can deliver low-teens top-line growth, while recovery from Lawson's losses should boost earnings growth.

Fig. 3: ACES 2017-2026F gross stores addition (# of stores)

Fig. 4: ACES 2015-2026F stores sqm addition & increase y-y

Fig. 5: Erajaya’s JV sales and net margin trend

Fig. 6: MAPA quarterly SSSG trend – Recovery trend on track

Fig. 7: MAPA 9M24 sales split based on region and y-y growth

Fig. 8: MAPI quarterly SSSG y-y by segment – Weak MAPI SSSG mainly driven by negative F&B SSSG

Fig. 9: MAPI, MAPA, and MAPI ex-MAPA inventory days trend

Fig. 10: Lawson excl. R&D income fee quarterly NPAT and 2025F

Fig. 11: MIDI quarterly NPAT and excluding Lawson NPAT

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)