Aspirasi Hidup Indonesia (ACES IJ)

Macro and Competitive Headwinds Persist   

• We expect AZKO’s sluggish performance to continue to 3Q25F given persisting economic headwinds, although mgmt. expects a stronger 4Q25.
• We see the return of Ace Hardware could pose med-to-long term pressure to AZKO despite AZKO’s growing brand awareness since its launch.
• We revised up our earnings estimates by +11.2/5.6% in FY25/26F on further opex efficiency. Maintain Neutral with a TP of Rp500.  

Expect sluggish 3Q25F; potential improvement in 4Q25

We anticipate the soft 2Q25 performance may continue to 3Q25F as soft economic condition persists and continues to dampen purchasing power. Moreover, AZKO’s 3Q24 figures were relatively high-base due to the timing of the Boom Sale period, which occurred in Jul and Aug24, despite our analysis indicating the impact of Boom Sale has been gradually waning. The company aims to maintain its gross margin at   ̴48% for FY25F and expect a stronger sales performance in 4Q25, which has historically been AZKO’s best performing quarter.

AZKO’s brand awareness and the return of Ace Hardware

The management remains optimistic about AZKO’s growing brand awareness, which has improved significantly since its launch earlier this year and is now quite comparable to its predecessor (see exhibit 2). However, we believe the economic headwinds have weighed on AZKO’s sales performance in 1H25, resulting in soft topline growth of +3.2% yoy and negative SSSG of -2.9%. Looking ahead, the return of Ace Hardware under MAPI could also pose medium-to-long term competitive pressure, in our view. This stems from potential product overlaps that could trigger price war, store locations in close proximity, and Ace Hardware’s strong brand recognition and customer loyalty. In the short term, however, we believe the impact will be limited as AZKO may benefit from its broader product range and wider store network.

Earnings revised upwards on opex efficiency; maintain Hold rating with TP Rp500

We maintain our conservative FY25 revenue growth projection of +4.1% yoy but have raised our earnings estimates by +11.2/+5.6% in FY25/26F, reflecting recent cost-efficiency measures. The management has recently reduced A&P budget to 1.5% of sales (from prev 2.5%) and implemented a hiring freeze initiative (and reallocating existing employees to new stores) to enhance operational efficiency. Nonetheless, we maintain our Hold rating on ACES as we believe the company continues to face headwinds, driving our expectation of negative growth for FY25, as revenue growth remaining heavily reliant on new store expansion. We lowered our TP slightly to Rp500 as we lowered our PE multiple target to 9.9x FY25F, given the company’s lack of growth catalyst and tighter competition landscape. ACES currently trades at 9.6x PE FY25F which we view as fairly valued.  Upside risks are faster pickup from economic headwinds and stronger than expected sales growth in 2H25, downside risks are slow performance in the new stores resulting in higher inventory days and weaker than expected purchasing power in 2H25.

… Read More 20250828 ACES