1Q25 result review: Strong start

AMRT started the year with a solid set of results, with 1Q25 revenue and NPAT reaching a low-teens percentage y-y growth despite a tougher macro backdrop. GPM increased both q-q and y-y, despite the typically lower GPM during the Lebaran season, attributable to the company's initiative to cut promotions by half and being more selective in handing out promotions. The improvement in GPM during 1Q25 is particularly important, in our view, as it indicates that the company has learned from its strategic missteps in 4Q24 and is now able to turn things around. Opex as a percentage of sales improved q-q and remained flat y-y, despite pressure from higher minimum wage increases and expenses related to new openings last year. We expect new opening-related opex as a percentage of sales to continue declining in subsequent quarters.

What to see beyond 1Q25

While challenges may persist in the coming quarters – particularly due to softer consumer purchasing power – we remain confident that the defensive nature of AMRT’s business model will enable it to outperform its peers. Historically, AMRT has maintained stable mid-single-digit same-store sales growth (SSSG) even during the most difficult macroeconomic conditions (Fig. 2). At the same time, the company has consistently generated a steady increase in free cash flow over the past five years (Fig. 3). Our forecast assumes 2024-2027F revenue / net profit CAGRs of 10.5%/15% – making AMRT one of the few Indonesian large-cap stocks capable of delivering double-digit growth on both top and bottom lines.

Maintain Buy on AMRT with TP of IDR2,350

Our TP is pegged on a 27.6x 2025F P/E target, equal to its five-year average P/E. Balancing growth and profitability will be a key strategic focus for the company amid the current macroeconomic headwinds. We view the company’s ability to recover from its strategic missteps in 4Q24 as a positive catalyst for the stock. Key downside risks include prolonged weakness in consumer purchasing power, as well as the potential for significant foreign capital outflows, given that the local-to-foreign investor ratio in AMRT stands at approximately 1:8/9. Currently, the stock trades at 25x 2025F P/E.

Fig. 2: 2014-2024 AMRT SSSG – Company still delivered a 5% average SSSG despite the cumulative +19% inflation and -11% USD/IDR depreciation in 2014-2017, showing its resiliency even in the toughest macroeconomic conditions, in our view

Fig. 3: AMRT free cash flow trend (IDRbn) – consistently generate strong cash flows after company’s aggressive stores expansion strategy before 2018

Fig. 4: AMRT and Indomaret (unlisted) performance comparison

Fig. 5: AMRT P/E band

Fig. 6: AMRT quarterly revenue trend (IDRbn)

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

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

Fig. 9: AMRT 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)