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

Expecting short-term pressure

Maintain Buy with higher TP of IDR1,960

Lower F&B revenue contribution and end-of-season (EOS) fashion sales drive 9M24 results miss

While Mitra Adiperkasa’s (MAPI) 3Q24 y-y sales growth remained strong at +17%, the earnings miss was primarily owing to lower-than-expected margins. F&B revenue contribution, particularly from Starbucks (SBUX US, Non-rated), declined significantly to 8.3% (from 13.1% in 3Q23), as SSSG did not recover (Fig. 1). Conversely, the lower-margin Digimap’s contribution increased to 15.4% (from 11.8% in 3Q23). Inventory days decreased slightly due to delayed end-of-season fashion sales in early 3Q24, and also a reduction in old inventory to 27% (Fig. 2). However, the company still targets a more optimal inventory level of around 126 days.

Valuation may be attractive, but still have some concerns over 4Q24F

MAPI's declining P/E multiple may appear attractive, especially compared to MAP Active (MAPA IJ, Buy). MAPI's ex-MAPA P/E currently trades at 7x 2025F P/E, slightly below its -1SD three-year average (Fig. 3). Additionally, MAPA's premium over MAPI has widened to 25% in the past three-four years (Fig. 4). However, we remain cautious about MAPI's 4Q24F earnings (Fig. 5). While we expect MAPA and the fashion segment to perform well, the F&B segment, particularly Starbucks, has not shown significant traffic recovery post-boycott. Further, the delayed iPhone 16 launch may pressure Digimap's business, which contributed 16% of 9M24 revenue. Despite strong revenue growth in other segments, these factors could weigh on 4Q24F earnings, in our view.

Maintain Buy with higher TP of IDR1,960, implying 22.5% upside

We cut our 2024F-2026F earnings estimates by ~13% due to the 3Q24 miss, weaker Starbucks outlook, and delayed iPhone 16 sales. We roll forward our valuation to 2025F, maintaining a P/E target multiple of 15x, resulting in a higher target price of IDR1,960 (vs. IDR1,870 earlier).

MAPI remains the top-performing discretionary retailer in our coverage universe. Near-term risks, particularly in 4Q24F, should not significantly impact future performance. Potential downside risks include slower inventory reduction and prolonged iPhone 16 sales delays. The stock currently trades at 12.2x 2025F P/E.

Year-end 31 Dec	FY23		FY24F		FY25F		FY26F
Currency (IDR)	Actual	Old	New	Old	New	Old	New
Revenue (bn)	33,319	37,989	38,003	44,558	43,002	51,644	48,648
Reported net profit (bn)	1,894	2,070	1,798	2,508	2,181	3,058	2,662
Normalised net profit (bn)	1,894	2,070	1,798	2,508	2,181	3,058	2,662
FD normalised EPS	114.07	124.72	108.31	151.08	131.39	184.23	160.34
FD norm. EPS growth (%)	-10.6	9.3	-5.1	21.1	21.3	21.9	22.0
FD normalised P/E (x)	14.0	–	14.8	–	12.2	–	10.0
EV/EBITDA (x)	4.3	–	3.7	–	3.2	–	2.8
Price/book (x)	2.7	–	2.3	–	2.0	–	1.7
Dividend yield (%)	0.6	–	1.4	–	1.4	–	2.1
ROE (%)	20.9	19.1	16.8	19.7	17.7	20.4	18.7
Net debt/equity (%)	net cash	net cash	net cash	net cash	net cash	net cash	net cash

Source: Company data, Verdhana estimates

Key data on Mitra Adiperkasa

Income statement (IDRbn)
Year-end 31 Dec	FY22	FY23	FY24F	FY25F	FY26F
Revenue	26,937	33,319	38,003	43,002	48,648
Cost of goods sold	-14,908	-18,225	-21,834	-24,337	-27,318
Gross profit	12,029	15,094	16,169	18,665	21,330
SG&A	-8,960	-11,498	-12,839	-14,675	-16,544
Employee share expense	0	0	0	0	0
Operating profit	3,070	3,596	3,330	3,990	4,786
EBITDA	5,838	6,452	7,446	8,247	8,984
Depreciation	-811	-901	-1,298	-1,343	-1,324
Amortisation	-1,957	-1,955	-2,817	-2,914	-2,874
EBIT	3,070	3,596	3,330	3,990	4,786
Net interest expense	-421	-386	-471	-535	-583
Associates & JCEs	70	93	96	108	123
Other income	454	-100	-100	-100	-100
Earnings before tax	3,173	3,203	2,855	3,463	4,227
Income tax	-662	-858	-628	-762	-930
Net profit after tax	2,511	2,345	2,227	2,701	3,297
Minority interests	-393	-452	-429	-520	-635
Other items
Preferred dividends
Normalised NPAT	2,118	1,894	1,798	2,181	2,662
Extraordinary items	0	0	0	0	0
Reported NPAT	2,118	1,894	1,798	2,181	2,662
Dividends	0	-168	-379	-360	-545
Transfer to reserves	2,118	1,726	1,419	1,822	2,116
Valuations and ratios
Reported P/E (x)	12.5	14.0	14.8	12.2	10.0
Normalised P/E (x)	12.5	14.0	14.8	12.2	10.0
FD normalised P/E (x)	12.5	14.0	14.8	12.2	10.0
Dividend yield (%)	–	0.6	1.4	1.4	2.1
Price/cashflow (x)	6.5	13.6	11.9	9.2	8.2
Price/book (x)	3.3	2.7	2.3	2.0	1.7
EV/EBITDA (x)	4.2	4.3	3.7	3.2	2.8
EV/EBIT (x)	7.9	7.6	8.2	6.6	5.2
Gross margin (%)	44.7	45.3	42.5	43.4	43.8
EBITDA margin (%)	21.7	19.4	19.6	19.2	18.5
EBIT margin (%)	11.4	10.8	8.8	9.3	9.8
Net margin (%)	7.9	5.7	4.7	5.1	5.5
Effective tax rate (%)	20.9	26.8	22.0	22.0	22.0
Dividend payout (%)	0.0	8.9	21.1	16.5	20.5
ROE (%)	30.2	20.9	16.8	17.7	18.7
ROA (pretax %)	20.2	18.0	13.7	15.2	17.1
Growth (%)
Revenue	46.2	23.7	14.1	13.2	13.1
EBITDA	44.6	10.5	15.4	10.8	8.9
Normalised EPS	402.1	-10.6	-5.1	21.3	22.0
Normalised FDEPS	402.1	-10.6	-5.1	21.3	22.0
Source: Company data, Verdhana estimates

Cashflow statement (IDRbn)
Year-end 31 Dec	FY22	FY23	FY24F	FY25F	FY26F
EBITDA	5,838	6,452	7,446	8,247	8,984
Change in working capital	-57	-3,071	-1,277	-597	-716
Other operating cashflow	-1,686	-1,435	-3,941	-4,755	-5,029
Cashflow from operations	4,095	1,946	2,229	2,895	3,239
Capital expenditure	-871	-1,723	-1,461	-1,275	-1,294
Free cashflow	3,224	223	767	1,620	1,945
Reduction in investments	0	0	0	0	0
Net acquisitions	0	0	0	0	0
Dec in other LT assets	0	0	0	0	0
Inc in other LT liabilities	0	0	0	0	0
Adjustments	229	-526	-137	-146	-165
CF after investing acts	3,453	-302	631	1,474	1,780
Cash dividends	0	-168	-379	-360	-545
Equity issue	0	0	0	0	0
Debt issue	-545	2,248	-1,286	-500	-1,000
Convertible debt issue	0	0	0	0	0
Others	-1,835	-1,954	136	194	201
CF from financial acts	-2,380	126	-1,528	-666	-1,344
Net cashflow	1,072	-176	-897	808	436
Beginning cash	2,778	3,851	3,675	2,777	3,586
Ending cash	3,851	3,675	2,777	3,586	4,022
Ending net debt	-3,250	-819	-777	-2,086	-3,522
Balance sheet (IDRbn)
As at 31 Dec	FY22	FY23	FY24F	FY25F	FY26F
Cash & equivalents	3,851	3,675	2,777	3,586	4,022
Marketable securities	315	443	443	443	443
Accounts receivable	842	1,085	1,255	1,418	1,602
Inventories	4,699	8,088	9,690	10,800	12,123
Other current assets	1,031	1,700	1,939	2,194	2,482
Total current assets	10,737	14,992	16,104	18,441	20,672
LT investments	297	356	356	356	356
Fixed assets	3,841	5,291	5,454	5,386	5,356
Goodwill	79	111	111	111	111
Other intangible assets	159	163	186	210	238
Other LT assets	5,899	6,605	6,719	6,841	6,978
Total assets	21,013	27,517	28,929	31,343	33,709
Short-term debt	601	2,856	2,000	1,500	500
Accounts payable	3,309	4,095	4,924	5,486	6,156
Other current liabilities	3,654	4,100	4,005	4,374	4,783
Total current liabilities	7,564	11,051	10,929	11,360	11,439
Long-term debt	0	0	0	0	0
Convertible debt
Other LT liabilities	3,693	4,054	4,207	4,368	4,538
Total liabilities	11,257	15,105	15,135	15,728	15,977
Minority interest	1,619	2,414	2,414	2,414	2,414
Preferred stock
Common stock	1,333	1,333	1,333	1,333	1,333
Retained earnings	5,546	7,307	8,726	10,548	12,664
Proposed dividends
Other equity and reserves	1,257	1,357	1,320	1,320	1,320
Total shareholders' equity	8,136	9,998	11,380	13,201	15,318
Total equity & liabilities	21,013	27,517	28,929	31,343	33,709
Liquidity (x)
Current ratio	1.42	1.36	1.47	1.62	1.81
Interest cover	7.3	9.3	7.1	7.5	8.2
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)	127.58	114.07	108.31	131.39	160.34
Norm EPS (IDR)	127.58	114.07	108.31	131.39	160.34
FD norm EPS (IDR)	127.58	114.07	108.31	131.39	160.34
BVPS (IDR)	490.15	602.26	685.52	795.25	922.75
DPS (IDR)	0.00	10.11	22.81	21.66	32.85
Activity (days)
Days receivable	9.8	10.6	11.3	11.3	11.3
Days inventory	103.2	128.0	149.0	153.7	153.1
Days payable	71.4	74.1	75.6	78.1	77.8
Cash cycle	41.6	64.5	84.7	86.9	86.7
Source: Company data, Verdhana estimates

Company profileIncorporated in 1995, MAP is the leading lifestyle retailers in Indonesia with over 2,600 retail stores and a diversified portfolio of over 150 brands that includes sports, fashion, department stores, kids, food & beverage, and lifestyle products. Some of MAP's iconic brands include Starbucks, Zara, Marks & Spencer, SOGO, SEIBU, Oshkosh B'Gosh, Reebok, among many others. As of 3M22, specialty stores contributes 74% towards MAP's revenue, followed by department stores (12%), Food & Beverage (13%), and others (1%).

Valuation MethodologyOur target price of IDR1,960 is based on 2025F target P/E of 15x, +1SD of its three-year mean. The benchmark index of the stock is JCI Index.

Risks that may impede the achievement of the target priceDownside risks include slower inventory reduction and prolonged iPhone 16 sales delays.

ESGMAP is committed to be a responsible and relevant driver of positive change in society. Driven by their "Better Business for a Better World" philosophy, MAP continue to uphold sustainability at the forefront of our business strategies and operations. As of 3rd Nov 2021, MAPI received a BBB MSCI ESG rating.

Fig. 1: MAPI’s quarterly SSSG y-y by segment – Weak MAPI SSSG mainly driven by negative F&B SSSG

Source: Company data, Verdhana research

Fig. 2: MAPI, MAPA, and MAPI ex-MAPA inventory days trend

Source: Company data, Verdhana research

Fig. 3: MAPI ex-MAPA P/E band

Source: Bloomberg Finance L.P., Verdhana estimates

Fig. 4: MAPA P/E premium (discount) to MAPI

Source: Bloomberg Finance L.P., Verdhana estimates

Fig. 5: Our view on each of MAPI’s business segments

Business segments	9M24 Revenue contribution	9M24 EBIT contribution	Outlook	Remarks
MAPA	45.0%	65.7%	++	- SSSG recovery should remain on track in 4Q24F. - 2Q24 should be the bottom margin for the year, expect improvement to continue in the 4Q24F and 2025F. - Remains MAPI's main revenue/net profit growth driver.
Specialty stores ex-MAPA	37.9%	26.3%
Others	21.9%	n.a.	+	- Big clearance in fashion segment should be done by July. - Although should expect some end-of-season sale, but we think the potential of higher sales (~29% of revenue typically were from 4Q) should able to compensate lower GPM.
Digimap	16.0%	n.a.	-	- Delayed iPhone 16 sales should impact MAPI's 4Q earnings negatively. Historically, 4Q revenue contributed to ~28% of Digimaps' FY revenue
Department stores	7.6%	11.0%	Neutral	- Cant expect much growth, but the large space that they covered help company to negotiate cheaper rents for the whole segments
F&B	8.8%	-3.5%	-	- Starbucks remains facing double whammy from boycott and heightened competition
Others	0.7%	0.4%	Neutral	-

Source: Verdhana research

Fig. 6: MAPI— 4Q24F forecasts

	9M23	9M24	y-y	4Q23	4Q24F	y-y	2024F	y-y
Revenue	23,792	27,616	16.1%	9,526	10,387	9.0%	38,003	14.1%
Gross Profit	10,859	11,824	8.9%	4,235	4,345	2.6%	16,169	7.1%
EBIT	2,566	2,388	-6.9%	1,030	942	-8.5%	3,330	-7.4%
NPAT	1,416	1,300	-8.2%	478	498	4.3%	1,798	-5.1%

GPM	45.6%	42.8%		44.5%	41.8%		42.5%
EBIT Margin	10.8%	8.6%		10.8%	9.1%		8.8%
NPM	6.0%	4.7%		5.0%	4.8%		4.7%

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.

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Rating Table

Rating Remains	Buy
Target price Increased from IDR 1,870	IDR 1,960
Closing price 20 November 2024	IDR 1,600
Implied upside	+22.5%
Market Cap (USD mn)	1,674.7
ADT (USD mn)	2.7

Relative performance chart

Source: LSEG, Verdhana

M cap (USDmn)	1,674.7
Free float (%)	49.0
3-mth ADT (USDmn)	2.7

(%)	1M	3M	12M
Absolute (IDR)	-8.6	5.3	-3.0
Absolute (USD)	-10.9	2.4	-5.6
Rel to Jakarta Stock Exchange Composite Index	-1.3	9.8	-5.9

Research Analysts

Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)

Tags: Retail, MAPI, MAPI JK, MAPI IJ, Jody Wijaya, Sandy Ham, Samuel Christian

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

Expecting short-term pressure

Key data on Mitra Adiperkasa

Fig. 1: MAPI’s quarterly SSSG y-y by segment – Weak MAPI SSSG mainly driven by negative F&B SSSG

Fig. 2: MAPI, MAPA, and MAPI ex-MAPA inventory days trend

Fig. 3: MAPI ex-MAPA P/E band

Fig. 4: MAPA P/E premium (discount) to MAPI

Fig. 5: Our view on each of MAPI’s business segments

Fig. 6: MAPI— 4Q24F forecasts

Rating Table

Relative performance chart

Research Analysts

yudi Administrator

Indonesia Retailers - Limited surprises as expected

Map Aktif Adiperkasa MAPA IJ - Buy - Lowest margin for the year

Midi Utama Indonesia MIDI IJ - Buy - Strategic move for a more agile MIDI

Indonesia Retailers - Discretionary retail 3Q24F preview

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

Midi Utama Indonesia (MIDI IJ) (Buy) - Cleaning up Lawson

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

Fig. 1: MAPI’s quarterly SSSG y-y by segment – Weak MAPI SSSG mainly driven by negative F&B SSSG

Fig. 2: MAPI, MAPA, and MAPI ex-MAPA inventory days trend

Fig. 3: MAPI ex-MAPA P/E band

Fig. 4: MAPA P/E premium (discount) to MAPI

Fig. 5: Our view on each of MAPI’s business segments

Fig. 6: MAPI— 4Q24F forecasts

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