FROM EQUITY RESEARCH DESK

IDEA OF THE DAY

Metal Mining: Jul24 update: weaker nickel and tin price, despite tight ore supply (OVERWEIGHT)

• Tin price weakened in Jul24 despite a tight supply in China and declining inventory levels globally.
• Nickel prices stabilized in Jul24. Yet, we remain cautious of further decline from weak seasonal demand.
• We maintain our Overweight rating on the sector, with TINS and NCKL as our top picks due to their better earnings visibility.

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AKR Corporindo: 1H24 earnings miss, 2H24 shall improve but is priced in; downgrade to Hold with a lower TP (AKRA.IJ Rp 1,555;HOLD; TP Rp 1,700) (SIDO.IJ Rp 700; BUY; TP Rp 810)

• AKRA’s 1H24 net profit only reached 35%/33% of our/cons FY24F est., a miss vs. historical seasonality due to weak distribution margins.
• Management lowered its FY24F EPS growth guidance to +4%-7% (vs. 12-15% prev.), reflecting weak 1H24 performance of petroleum segment.
• We trimmed FY24-25F EPS est. by 2%-4% on lower petroleum margin assumptions and cut our rating to Hold with an 8% lower TP of Rp 1,700.

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Bank Jago: 1H24 earnings miss, but solid asset quality to support 2H24 earnings (ARTO.IJ Rp 2,570 ;BUY; TP Rp 3,800)

• ARTO booked a higher 2Q24 NP (+30% qoq), supported by 10% qoq loan growth which offset the lower NIM and higher CoC.
• 1H24 NP is below our and consensus FY24F at 39/32%, but we expect higher NIM and steady CoC to improve NP in 2H24.
• We lowered our LT ROE from 18.1% to 16.7% as we trimmed our NIM, which is partly offset by lower CoC. Maintain BUY with a TP of Rp3,800. 

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Unilever Indonesia: Inline 1H24 earnings, but weak 2Q24 top line; price cuts and flat volume growth may continue ahead (UNVR.IJ Rp 2,490; SELL; TP Rp 2,200)

• UNVR indicates a weak top line may continue with further price cuts on the table; we estimate lower vol. growth at -0.2%/1% in FY24-25F.
• On the back of persisting challenges, we anticipate 3Q24 earnings may likely see negative yoy growth due to the high base in 3Q23.
• We maintain our Sell rating on a continuing challenging outlook and premium valuation; with a lower TP of Rp2,200 (FY25F PE of 18.3x).

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RESEARCH COMMENTARY

2Q ANTM: stronger than expected results

• 2Q net profit stood at Rp1.3tn, +450% qoq, reaching 53.6%/65.1% of ours/cons estimate
• 2Q revenue reached Rp14.5tn, +69% qoq/+45% yoy, reaching 56.6%/53.3% of ours/cons estimate
• ANTM recorded Rp316bn of forex gain (1Q:Rp260bn), which boosted 1H forex gain to Rp576bn. (Timothy - BRIDS)

AMMN 2Q NP reached US$346mn, +168% qoq

• Implying MEDC portion of US$72.3mn, higher than our estimate of US$50mn.
• At US$72mn, MEDC's 2Q NP could reach US$100mn, +27% qoq, with 1H24E NP at US$180mn, reaching 51%/55% of cons/our estimate.

BTPS 2Q24 Results (Below) and Meeting KTA

• BTPS reported net profits of Rp288bn in 2Q24 (+9% qoq, -12% yoy), bringing its 1H24 NP to Rp552bn (-27% yoy), forming 42% of FY24's consensus NP (1H23 NP formed 70% of FY23's due to the low base in 4Q23).
• quarterly improvement in 2Q24 NP was driven by lower provisions, with CoC improving to 12.5% from 13.6% previously, offsetting the lower lending balance. NIM remained relatively flat as the higher yield was offset by higher CoF.
• On a yearly basis, 2Q24 NP declined by 12%, due to lower loan growth (-13% yoy), lower NIM (-187bps yoy), and higher opex (+11% yoy) as the bank continues its collection efforts.
• Repayment rates continued their positive trend, reaching 94.0% in Jun24 from 93.0% in Dec23 and 93.4% in Mar24, and trend x-days reaching 1.15% in Jun24, one of the lowest since 2023.
• The improving loan quality was driven by stringent disbursement, i.e., not to problematic areas (mostly Java) and to recurring customers. Hence, the lending balance declined 4% qoq to Rp10.6tr (-13% yoy).
• If the positive trend continues in 2H24, management aims to lower the CoC to approximately 11%.
• Management believes that it can achieve flat to slight yoy improvement in FY24 bottom line, i.e., approximately Rp1.1tr.
• In our view, the bank has shown improvement in managing asset quality, improving sequential NP and CoC. If this continues, 2H24 could be the turning point in view of the low base in 2H23. The risk to our view is the high base of consensus FY24 NP expectation of approximately Rp1.3tr. (Victor Stefano & Naura Reyhan Muchlis - BRIDS)

Coal Price Update | Jul24, Week4

Stable Prices Amid Still Limited Demand Pick up

• Newcastle and Indonesian Coal Prices (ICI) have remained fairly stable from the previous week. ICI1, ICI2, and ICI3 saw increases of 0.4%/0.2%/0.1% WoW. Newcastle, ICI4 and ICI5 decreased by -3%/-0.5%/-0.7% WoW.
• Coal inventory levels at China ports have continued to drop from their peak but remain above the average levels of the past five years. Meanwhile, India's inventory levels have remained steady.
• Overall, we see the recent prices to reflect still limited demand pick up and still ample inventory.

 

Industry channel checks and data points:

• In our recent call with ADRO and ITMG, both miners concurred that higher rainfall in Jun24 affected Indonesia’s production.
• ITMG indicated firm demand from China, with the possibility of 40Mt cut in China’s domestic production in 2H24 to potentially support imports.
• UNTR’s Pama Jun24 production decreased by -4% MoM, aligned with the trend in national production, though Pama still performed better.
• We’re hearing more unconfirmed noises about a possible revision in royalty scheme (possibly to benefit IUPK miners), but this is likely to be implemented only under the next government.
• (Erindra Krisnawan, CFA & Christian Sitorus – BRIDS)

 

Please refer to our latest sector report on latest view on Coal:

https://link.brights.id/brids/storage/33358/20240722-Coal.pdf

PWON 1H24 Result: Core Profit In-Line

• PWON booked net profit of Rp515bn (+55.2%qoq, 2.2%yoy), bringing its 1H24 achievement to Rp846bn (-23%yoy), which formed 39% to our last FY24F estimates and to consensus (i.e. Below).
• Revenue remain solidly growing at 15%yoy and 13%qoq, with recurring revenue contributing 72% in 2Q24.  Company's space rental revenue grew 10%yoy in 1H24, while its Hotel revenue grew 17%yoy.
• PWON however booked Rp170bn forex loss in 2Q24, increased 33%qoq due to its 2028-due USD notes of ~USD400mn, despite of company currently at net cash position. Stripping out the forex loss, core profit remain forming 52% to our last estimates (i.e. In-Line)
• We will revisit our forecast to adjust 1H24 achievement and FY24F/FY25F Outlook. We currently have a BUY rating on PWON with TP of Rp610 based on ~56% discount to its RNAV of Rp1,377/share. (Ismail Fakhri Suweleh – BRIDS)

UNTR Jun24/1H24 Operational: Seasonal Factors Affect Jun24, but 1H24 Remains Well Ahead of Expectations

Pama 

• Jun24: Coal /OB Production +11/+3% YoY; -4/-6% MoM.  The lower Jun24 volume was in line with the national production trend, but Pama still outperformed YoY, indicating less impact from weather on its operation.
• 1H24: Coal/OB Production +18/+13% YoY, ahead of expectation, forming reaching 54/56% of our FY24 targets. Coal/ OB production fell MoM in Jun24, but still outperformed national production YoY; 1H24 still ahead of FY24 est.

 

Komatsu Sales

• Jun24: -18% YoY, +9% of MoM to 390 units.
• 1H24: -32% YoY to 2,147 units, a decline was observed across all mining sectors.
• 1H24 performance is also stronger than-expected, forming 56% of our FY24 forecast.

 

Coal Mining

• Jun24: +9% YoY, +33% MoM to 1,3Mt
• 1H24: +17% YoY to 7,5Mt.
• Strong Jun24 and 1H24 performances formed 70% of our FY24 expectations.

 

Gold Sales

• Jun24: +51% YoY, +37% MoM to 25k oz.
• 1H24: +0.4% YoY, reflecting the RKAB approval delay until end of 1Q24.
• 1H24 formed 47% of our FY24 forecast (in-line).

 

Nickel Mining

• Jun24: limonite/saprolite ore sales volume +9%/-24% MoM, bringing 1H24 volume to 546/421k wmt (first year of sales in FY24).

 

 

Comment: Overall, Jun24 continued to reflect sequential improvement, except for Komatsu and mining contracting volume (down mom, though Pama’s 1H24 production is still well ahead of national production numbers). 1H24 remains ahead of our FY24 est. for all divisions, cementing the possibility of better-than-expected 1H24 earnings (we estimated 1H24 operating profit to form 55% of FY24F est.). (Erindra Krisnawan & Christian Sitorus – BRIDS)

RESEARCH COMMENTARY 2Q ANTM: stronger than expected results 2Q net profit stood at Rp1.3tn, +450% qoq, reaching 53.6%/65.1% of ours/cons estimate 2Q revenue reached Rp14.5tn, +69% qoq/+45% yoy, reaching 56.6%/53.3% of ours/cons estimate ANTM recorded Rp316bn of forex gain (1Q:Rp260bn), which boosted 1H forex gain to Rp576bn. (Timothy - BRIDS)                                         AMMN 2Q NP reached US$346mn, +168% qoq Implying MEDC portion of US$72.3mn, higher than our estimate of US$50mn. At US$72mn, MEDC's 2Q NP could reach US$100mn, +27% qoq, with 1H24E NP at US$180mn, reaching 51%/55% of cons/our estimate.                                                           BTPS 2Q24 Results (Below) and Meeting KTA BTPS reported net profits of Rp288bn in 2Q24 (+9% qoq, -12% yoy), bringing its 1H24 NP to Rp552bn (-27% yoy), forming 42% of FY24's consensus NP (1H23 NP formed 70% of FY23's due to the low base in 4Q23). quarterly improvement in 2Q24 NP was driven by lower provisions, with CoC improving to 12.5% from 13.6% previously, offsetting the lower lending balance. NIM remained relatively flat as the higher yield was offset by higher CoF. On a yearly basis, 2Q24 NP declined by 12%, due to lower loan growth (-13% yoy), lower NIM (-187bps yoy), and higher opex (+11% yoy) as the bank continues its collection efforts. Repayment rates continued their positive trend, reaching 94.0% in Jun24 from 93.0% in Dec23 and 93.4% in Mar24, and trend x-days reaching 1.15% in Jun24, one of the lowest since 2023. The improving loan quality was driven by stringent disbursement, i.e., not to problematic areas (mostly Java) and to recurring customers. Hence, the lending balance declined 4% qoq to Rp10.6tr (-13% yoy). If the positive trend continues in 2H24, management aims to lower the CoC to approximately 11%. Management believes that it can achieve flat to slight yoy improvement in FY24 bottom line, i.e., approximately Rp1.1tr. In our view, the bank has shown improvement in managing asset quality, improving sequential NP and CoC. If this continues, 2H24 could be the turning point in view of the low base in 2H23. The risk to our view is the high base of consensus FY24 NP expectation of approximately Rp1.3tr. (Victor Stefano & Naura Reyhan Muchlis - BRIDS)                                     Coal Price Update | Jul24, Week4 Stable Prices Amid Still Limited Demand Pick up Newcastle and Indonesian Coal Prices (ICI) have remained fairly stable from the previous week. ICI1, ICI2, and ICI3 saw increases of 0.4%/0.2%/0.1% WoW. Newcastle, ICI4 and ICI5 decreased by -3%/-0.5%/-0.7% WoW. Coal inventory levels at China ports have continued to drop from their peak but remain above the average levels of the past five years. Meanwhile, India's inventory levels have remained steady. Overall, we see the recent prices to reflect still limited demand pick up and still ample inventory.   Industry channel checks and data points: In our recent call with ADRO and ITMG, both miners concurred that higher rainfall in Jun24 affected Indonesia’s production. ITMG indicated firm demand from China, with the possibility of 40Mt cut in China’s domestic production in 2H24 to potentially support imports. UNTR’s Pama Jun24 production decreased by -4% MoM, aligned with the trend in national production, though Pama still performed better. We’re hearing more unconfirmed noises about a possible revision in royalty scheme (possibly to benefit IUPK miners), but this is likely to be implemented only under the next government. (Erindra Krisnawan, CFA & Christian Sitorus – BRIDS)   Please refer to our latest sector report on latest view on Coal: https://link.brights.id/brids/storage/33358/20240722-Coal.pdf                                                   PWON 1H24 Result: Core Profit In-Line PWON booked net profit of Rp515bn (+55.2%qoq, 2.2%yoy), bringing its 1H24 achievement to Rp846bn (-23%yoy), which formed 39% to our last FY24F estimates and to consensus (i.e. Below). Revenue remain solidly growing at 15%yoy and 13%qoq, with recurring revenue contributing 72% in 2Q24.  Company's space rental revenue grew 10%yoy in 1H24, while its Hotel revenue grew 17%yoy. PWON however booked Rp170bn forex loss in 2Q24, increased 33%qoq due to its 2028-due USD notes of ~USD400mn, despite of company currently at net cash position. Stripping out the forex loss, core profit remain forming 52% to our last estimates (i.e. In-Line) We will revisit our forecast to adjust 1H24 achievement and FY24F/FY25F Outlook. We currently have a BUY rating on PWON with TP of Rp610 based on ~56% discount to its RNAV of Rp1,377/share. (Ismail Fakhri Suweleh – BRIDS)                         UNTR Jun24/1H24 Operational: Seasonal Factors Affect Jun24, but 1H24 Remains Well Ahead of Expectations Pama  Jun24: Coal /OB Production +11/+3% YoY; -4/-6% MoM.  The lower Jun24 volume was in line with the national production trend, but Pama still outperformed YoY, indicating less impact from weather on its operation. 1H24: Coal/OB Production +18/+13% YoY, ahead of expectation, forming reaching 54/56% of our FY24 targets. Coal/ OB production fell MoM in Jun24, but still outperformed national production YoY; 1H24 still ahead of FY24 est.   Komatsu Sales Jun24: -18% YoY, +9% of MoM to 390 units. 1H24: -32% YoY to 2,147 units, a decline was observed across all mining sectors. 1H24 performance is also stronger than-expected, forming 56% of our FY24 forecast.   Coal Mining Jun24: +9% YoY, +33% MoM to 1,3Mt 1H24: +17% YoY to 7,5Mt. Strong Jun24 and 1H24 performances formed 70% of our FY24 expectations.   Gold Sales Jun24: +51% YoY, +37% MoM to 25k oz. 1H24: +0.4% YoY, reflecting the RKAB approval delay until end of 1Q24. 1H24 formed 47% of our FY24 forecast (in-line).   Nickel Mining Jun24: limonite/saprolite ore sales volume +9%/-24% MoM, bringing 1H24 volume to 546/421k wmt (first year of sales in FY24).     Comment: Overall, Jun24 continued to reflect sequential improvement, except for Komatsu and mining contracting volume (down mom, though Pama’s 1H24 production is still well ahead of national production numbers). 1H24 remains ahead of our FY24 est. for all divisions, cementing the possibility of better-than-expected 1H24 earnings (we estimated 1H24 operating profit to form 55% of FY24F est.). (Erindra Krisnawan & Christian Sitorus – BRIDS)                             MARKET NEWS

MACROECONOMY

US Core PCE, Fed’s preferred inflation gauge, rose 0.2% mom in Jun24

US Core PCE, Fed’s preferred inflation gauge, rose 0.2% mom in Jun24, slightly higher than market expectations of 0.1%. On an annual basis, the core PCE rose 2.6%, unchanged from May. The figure shows that disinflation progress continues along with the economic moderation. Personal income rose 0.2% mom, slowing from May’s 0.4%, while personal spending slowed to 0.3% from 0.4%. (Bloomberg)

 

SECTOR

Consumer: Vietnamese Dairy Company to Invest in Indonesia to Support the Free Meal Program

A Vietnamese company plans to invest in Indonesia to produce cow's milk, aiming to reduce import rates and support the President and Vice President-elect's free meal program. They need 100,000ha of land for the project to produce 1.8 tons of milk, with potential investment areas in Eastern Indonesia, Sumatra, and Lampung. (IDX)

 

CORPORATE

BYD Motor Indonesia Aims to Deliver 2,500 Units to Consumers by the End of Jul24

BYD Motor Indonesia plans to deliver over 2,500 vehicles to consumers by the end of Jul24, accelerating the pre-order process for BYD products such as the BYD Seal, BYD Atto 3, and BYD Dolphin, and collaborating with dealers and partners to expedite delivery on a daily basis. (Kontan)

 

Toyota Sales Increase by 11% at GIIAS 2024

PT Toyota Astra Motor (TAM) recorded a notably positive sales performance during the eight-day Gaikindo Indonesia Auto Show (GIIAS) 2024. According to TAM, Toyota managed to sell 4,245 units, marking an 11% increase compared to the previous year's GIIAS event achievement. Additionally, 80% of the total Innova Zenix units sold were of the hybrid variant. (Liputan6)