Avia Avian Tbk (AVIA IJ)

Cautiously optimistic FY24 outlook

 

  • The management’s latest guidance is cautiously optimistic with FY24 volume growth of 4-8% yoy for 6-10% top line growth. 
  • 2M24 sales depict a mixed view. We revise up our forecast of FY24-25F net profit forecast by 5.6% and 5.8% due to higher gross margins
  • Soft sales volume may pose risk to our forecast. Maintain BUY with a higher TP of Rp660, implying FY24F PE of 24.4x.

FY24 revenue guidance of 6-10% yoy, supported by product launches

AVIA’s management targets FY24 revenue growth of 6-10% yoy (higher vs FY23: 4-6%) with volume growth of 4-8% yoy (FY23: minus -1% to 1%). In 2Q23 and 3Q23, the company launched 14 new products across various categories. In 4Q23, AVIA reported robust volume growth of 13.3% yoy and +15.6% qoq, partially as the result of greater acceptance of new products launched in the previous quarters. The positive volume and sales trend continued in Jan24. However, Feb24 sales volume looks soft, and thus, the company maintains its cautious view for FY24.

 

FY23-26F net profit CAGR of 5.8%, supported by higher margins

We expect the volume growth to be maintained at a moderate level and thus, forecast 3.6%-4.6% yoy volume growth and 2% ASP adjustments in FY24-25F. For FY24, AVIA estimates gross margins ranging from 43-45% (vs. FY22-23’s 41-45%). We forecast FY24-25F gross margins of 44.4% and 44.5% (higher vs our previous forecast of 43.5%) due to stable input cost (i.e crude oil) despite our expectation of continued high BTL(Below-the-line promotion) to support sales. On the operating front, we maintain opex/revenue at around 21% in FY24-25F (vs. FY22-23’s 19-21%) given the company’s plan to continue pushing promotions amid soft purchasing power and new product launches. This leads to our projected FY24-25F net profit of Rp1.68tr (+2% yoy) and Rp1.79tr (+6.7% yoy) with 2023-26F CAGR of 5.8%. We raised our FY24-25F net profit by 5.6% and 5.8%, respectively, supported by higher gross margins.

 

Maintain BUY with a higher TP of Rp660

At the current share price, AVIA trades at FY24F PE of 20.9x, below -1SD avg 2y PE of 22.2x and a 15.8% premium to global peers. Taking into account our new forecast, we maintain our BUY rating with a higher TP of Rp660 with implied FY24F PE of 24.4x. Key risk to our view is soft volume in 2Q23 onward post Ramadan which may pose downside to our 3.6% yoy volume growth estimate for FY24. This may be balanced by upside risks from higher gross margins if oil prices turn out to be stable, and an extensive product mix to tap the downtrading market.

 

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