Company Update / IJ / Click here for full PDF version
Author(s): Kevie Aditya, Elbert Setiadharma
- 1Q20 core earnings were above estimates; drop in 2Q20 onwards will be largely expected and most likely better than the rest.
- Nonetheless, in-stores traffic steadily improved since its bottom in Apr 2020. GPM and opex shall remain under control in our view.
- -15% FY20F core earnings decline is better amidst current condition. With solid GCG and operational, maintain Buy with higher TP Rp1,800.
1Q20 results was above expectations; drop in 2Q20 shall be expected
' 1Q20 core net profit was flattish at Rp253bn (+2.5% yoy), above at 27/28% of our and consensus' estimates (3Y average of 22%). Drop in 2Q20 onwards will be largely expected and most likely better than the rest. 5M20 SSSG stood at -7.6% (vs. 3M20 SSSG of +2.5%). On a more positive note, 1Q20 GPM improved +162bps yoy (+104bps qoq) to 47.1%.
In-stores traffic steadily improved; although not yet normal
We have seen SSSG improved from -27.7% in Apr20 to -18.2% in May20 which may also imply improving stores' traffic (as it does not include loss of sales from closed stores). We expect in-stores traffic to further improve in June onwards; and possibly normalize in mid-3Q20. Meanwhile, as of today, our channel check suggests all of ' stores have re-opened (vs. c.17% closed in mid-May and c.21% in mid-April). also managed to still open 9 stores YTD (+4.4% of total retail space).
We estimate -15% core earnings decline in FY20F, which is better considering the severity of Covid-19 impact to retailers
We cut our FY20F sales growth estimates to +0.3% yoy (previously +4.6% yoy). Nonetheless, with better product mix and stable USD/IDR, may be able to maintain its GPM at 45.5% (1Q20: 47.1% - we are being conservative), while c.20% of its operational staffs' salaries was variable (dependant on meeting sales target) and rentals in closed stores were waived. All in, we cut our FY20F earnings estimates by 6.1% to Rp877bn, implying -15% yoy earnings decline, better vs. the sector's -35% yoy decline.
Expensive for a reason; maintain Buy with higher TP of Rp1,800
With current improvement trajectory, we are almost positive that will get back in shape as soon as Covid-19 ends. We expect ' 2021F earnings to rise to Rp1.1tr (+3.2% CAGR 2019-21F). We believe deserves its premium valuation as it remains the strongest retailer during pandemic backed with solid GCG and operational. We maintain our Buy call and raised our TP to Rp1,800, now pegged to 28.5x (+1 s.d. above 5-year mean) as the worst is likely over, from previously 23.1x (5-year mean).
Sumber : IPS
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