Bank Syariah Indonesia (BRIS.IJ IDR 2.380 BUY.TP IDR 2.700) Sustainable growth outlook through dominance in the Sharia market; reinitiate with Buy

Stock Code	Last Price	Change	Change %
TPIA	10,500	975	10.24%
DSSA	52,700	900	1.74%
DCII	153,100	550	0.36%
IBST	5,500	475	9.45%
RAJA	2,610	300	12.99%
RDTX	12,850	250	1.98%
PACK	2,470	220	9.78%
SHIP	2,100	210	11.11%

Bank Syariah Indonesia (BRIS IJ)

Sustainable growth outlook through dominance in the Sharia market; reinitiate with Buy

Driven by above-peers’ financing growth, low-cost funding, and better efficiencies, we expect BRIS to deliver c. 15% EPS growth in FY24-25F.
Given its sustainable leadership in the fast-growing Sharia banking market, we believe BRIS’ scarcity premium valuation is justified.
We reinitiate coverage on BRIS with a Buy and TP of Rp2,700, based on an inverse cost of equity GGM with CoE of 8.0%, implying 2.6x PBV.

Sharia products as the key driver for BRIS’ TPF growth outperformance

BRIS grew its TPF by 11.8% CAGR in FY20-23, outperforming the banking industry by 4.4% p.a, primarily leveraging on its low-cost funding from its Wadiah Savings and the profit-sharing saving product, Mudharabah. The flagship Wadiah saving product adheres to Sharia principles, incurring neither monthly administrative fees nor paying interest to customers, and is particularly attractive for the low-income depositors.

A clear market leader in the growing Sharia market

Indonesia presents an attractive prospect as Sharia banking assets currently only account for 7.5% of total banking assets, well below Malaysia’s c. 31% (although this is partly due to the difference in industry regulations). In the past 5 years, the growth of Sharia banking has consistently outpaced that of conventional banking, and this looks set to continue. At present, BRIS already serves 19.5 million customers, but we think there are still significant growth opportunities considering the c. 240 million Muslim population in Indonesia. BRIS’ financing, customer deposits and assets in 9M23 accounted for 42.2%, 42.2%, and 39.5% of the Sharia Banking total in Indonesia, respectively, making the bank a clear market leader. The bank’s dominant Sharia market share reflects its strong reputation, presence, reach, and its wide product offerings.

Expect strong earnings growth, driven by financing growth and a lower CIR

BRIS’ 38% earnings CAGR in FY20-23 has been largely supported by strong financing growth (+15% p.a.) and a decline in CIR to 50.1% in FY23 from 54.1% in FY20. We forecast net profit to grow 16/14% in FY24/ FY25 as we expect c. 15% financing growth p.a. and the CIR to fall steadily to 48.7% in FY25F.

Reinitiate coverage with a Buy rating and TP of Rp2,700

We reinitiate coverage on BRIS with a TP of Rp2,700 and a new valuation using an inverse cost of equity GGM. Our valuation is based on 8.0% cost of equity (historical average), LT growth of 3.0%, and FY24F ROE of 15.9%, implying fair value PBV of 2.6x to BF FY24/25F. The main risks in our view include lower financing growth and a higher cost of funds.

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