ERAJAYA SWASEMBADA – TP: Rp4,000/sh (BUY)
Higher TP on solid volume growth
Latest financial update : above previous expectations
Erajaya Swasembada (ERAA) booked Rp453.7bn (+209.1% YoY) net income in 1H18, reaching 65% of our FY18F. On top line, net Revenue increased by 54.6% YoY to Rp17.1tn, which is in-line with our FY18F. As revenue outgrew COGS and Opex, operating income more than tripled to Rp731 bn , already achieved 73% of our FY18F. On the profitability, gross margin slightly improved by 110bps (YoY) to 9.9%, operating margin rose by 210bps to 4.3%, net profit margin also expanded by 140bps to 2.7%. Breaking down the revenue, Cellular phones and tablet contributed most by 84.12% of net revenue, followed by electronic vouchers on 6.7%, accessories posted 4.3%, computers and other electronic devices booked 1.9%.
Minimum impact from import tariff regulation
According to the company, issue on additional import tax to 7.5% will only affect the spare-parts. The impact should be minimal for ERAA as the company mentioned it will only increase the ASP by around 1%.
Buy rating maintained with higher TP
In our view, the sales of cellular phones and tablet will remain solid in the following quarters, as there were contributed by the recent sales of Samsung Galaxy Note 9, new products and more upcoming exhibitions. We revised up our earnings forecasts (exh 3) following strong 1H18 numbers as we mainly raise our sales per outlet growth assumptions to 10% on average vs 4% previously. Therefore, we also raised our DCF-based TP on ERAA to Rp4,000, implying 14.0x 2019F PER. This report marks the transfer coverage of ERAA to Robert Sebastian.
Ciptadana Securities
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