Alfamidi delivered a solid performance in 1Q25, recording +20% y-y earnings growth, achieving 29% of our 2025F earnings forecast. Excluding losses from the Lawson (unlisted) operation, Alfamidi's earnings rose even more strongly, up +28% y-y (Fig. 2). The slight y-y decline in gross profit margin (GPM) appears to have been driven by the timing of the Lebaran holiday, during which promotional activities typically increase. Losses from the Lawson business widened to IDR57bn (+42% y-y), or IDR40bn on an adjusted basis, reflecting Alfamidi's 70% ownership (Fig. 3). Opex as a percentage of sales fell by 60bp y-y, mainly due to a 40bp reduction in salary costs. We believe this was driven by a reallocation of employees from closed Lawson stores, as the total number of employees remained flat y-y despite the addition of ~200 new Alfamidi stores last year.

What to see beyond 1Q25

We believe that Alfamidi is similar to Alfamart (AMRT IJ, Buy), as they are both selling basic daily necessities to the consumers. Hence, the defensiveness of its business model should be able to help it withstand a tougher macro environment. Moreover, Alfamidi is positioned for stronger growth than AMRT, in our view, due to its higher ex-Java sales mix of 52% (vs AMRT's 32%), benefiting from favorable soft commodity prices that enhance consumer spending power in those regions. We believe the upcoming transfer of the Lawson business to AMRT, scheduled for later in May, should further support Alfamidi’s earnings. Lawson’s losses, which have weighed on MIDI’s profitability over the past year, will be removed from the books. We estimate this could provide a ~5% boost to MIDI’s earnings relative to our forecasts (Fig. 4).

Maintain Buy with TP of IDR420

Our TP is based on a 20.7x 2025F P/E, implying a 25% discount to our 27.6x target P/E for AMRT. While limited liquidity has always been investors’ pushback, we believe the strong 1Q25 results, the divestment of Lawson, and the company’s resilient business model could serve as meaningful positive catalysts for the stock. Key downside risks include sustained weakness in consumer purchasing power. Currently, MIDI trades at a 19x 2025F P/E.

Fig. 2: Alfamidi-only NPAT (excl. Lawson, IDRbn)

Fig. 3: Lawson excl. R&D income fee quarterly NPAT (IDRbn)

Fig. 5: MIDI P/E band

Fig. 6: MIDI quarterly revenue trend (IDRbn)

Fig. 7: MIDI quarterly gross profit trend (IDRbn)

Fig. 8: MIDI quarterly opex as % of sales trend

Fig. 9: MIDI quarterly net profit trend (IDRbn)

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)