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

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 Dec	FY24		FY25F		FY26F		FY27F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
Revenue (bn)	19,888	21,075	20,913	23,348	23,222	0	25,723
Reported net profit (bn)	546	717	671	868	794	0	954
Normalised net profit (bn)	546	717	671	868	794	0	954
FD normalised EPS	16.34	21.45	20.08	25.96	23.74		28.53
FD norm. EPS growth (%)	5.8	16.5	22.9	21.0	18.2		20.2
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 (%)	13.9	16.2	15.4	17.4	16.2		17.3
Net debt/equity (%)	net cash	net cash	net cash	net cash	net cash		net 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				QoQ	YoY			YoY	12M24/	12M24/
Profit and loss statement (IDRbn)	4Q23	3Q24	4Q24	(%)	(%)	12M23	12M24	(%)	Nmr	Cons
Revenue	4,427	4,902	5,202	6.1	17.5	17,351	19,888	14.6	100.5%	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	19.4	89.0%	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	5.8	88.7%	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-23	Sep-24	Dec-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. 3: One-off costs assumption for Lawson standalone

	Costs (IDRmn)	Remarks
Estimated breakdown of Capex/standalone store
Rent (5 years)	1,000	3 years paid upfront (IDR600mn)
Lawson equipment	500	equals to Lawson SIS capex
Other equipment	500	Racks, cashier, etc
Total Capex/standalone store	2,000
Estimated one-off/standalone store
Rent (1 yr left)	200	Not extending the other 2 years
Lawson equipment	500	Scrapped
Other equipment	-	Can be use for other Alfamart stores
Total one-off cost/standalone store	700	Loss per stores
Total Lawson standalone one-off	140,000	Assumption of 200 store closures

Source: Company data, Verdhana estimates

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

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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

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

Recovery in motion

Key data on Midi Utama Indonesia

Fig. 1: MIDI 2024 results recap

Fig. 2: Earnings estimate changes

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

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

Fig. 5: Alfamidi-only NPAT (excl. Lawson, in IDRbn)

Fig. 6: MIDI P/E band

Fig. 7: MIDI quarterly revenue

Fig. 8: MIDI quarterly gross profit

Fig. 9: MIDI quarterly opex as percentage to sales

Fig. 10: MIDI quarterly net profit

Rating Table

Relative performance chart

Research Analysts

yudi Administrator

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Indonesia Retailers - Discretionary retail 3Q24F preview

Map Aktif Adiperkasa (MAPA IJ) (Buy) - Emerging stronger

Mitra Adiperkasa (MAPI IJ) (Buy) - Expecting short-term pressure

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

Fig. 1: MIDI 2024 results recap

Fig. 2: Earnings estimate changes

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

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

Fig. 5: Alfamidi-only NPAT (excl. Lawson, in IDRbn)

Fig. 6: MIDI P/E band

Fig. 7: MIDI quarterly revenue

Fig. 8: MIDI quarterly gross profit

Fig. 9: MIDI quarterly opex as percentage to sales

Fig. 10: MIDI quarterly net profit

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