Jasa Marga (JSMR.IJ Rp 5,475; BUY TP Rp6,500) Reinitiate with Buy rating; Attractive FY24-25 28%-33% EPS growth from deleveraging and tariff hikes

Stock Code	Last Price	Change	Change %
MLPT	30,325	5,050	19.98%
MKPI	25,350	1,950	8.33%
DSSA	57,575	1,475	2.63%
AMMN	8,000	575	7.74%
CUAN	11,925	400	3.47%
RATU	6,350	375	6.28%
TPIA	9,550	325	3.52%
SHIP	2,620	320	13.91%

Jasa Marga (JSMR IJ)

Reinitiate with Buy rating; Attractive FY24-25 28%-33% EPS growth from deleveraging and tariff hikes

We forecast FY24-25F revenue to grow by 11%-24%, driven by new toll roads’ traffic acceleration and impact of special tariff hike (18%-35%).
We expect JTT divestment proceeds to be used for deleveraging, while capex will also be moderating at Rp6tr-7.3tr (vs Rp23tr-46tr in FY17-23).
We estimate attractive 28%-33% core EPS growth with upsides from lower rates, thus, we reinitiate with a BUY rating and a TP of Rp 6,500.

Revenue growth from special tariff adjustment in FY23-24

In FY23-24, PUPR granted JSMR to increase tariff above the normal rate (~7%) for several toll roads, namely Jakarta-Cikampek, Balikpapan-Samarinda, Semarang-Solo (+17%-35%). Despite the higher price increases, traffic in Jakarta-Cikampek toll road still grew by -5%/+2% qoq in 1Q24/2Q24, and revenue grew by -2%/+49% qoq. In addition, we expect JSMR’s FY25F revenue to be boosted by tariff adjustments for Jakarta-Tangerang and Jakarta Intra Urban Tollroad (Tol Dalam Kota), which represents ~33% of JSMR’s total volume and contributes ~20% to its total revenue. As such, we expect FY24F/FY25F toll road revenue to grow by 24%/11%, contributed by 3%/4% volume growth. We expect 2%/3% traffic vol growth from mature toll roads (vs 4% in 2023), while we expect a 12% traffic growth for the new toll roads for FY24F-FY25F (vs 16% in FY23).

Deleveraging from JTT proceed; moderating capex cycle in FY24F/FY25F

We expect the JTT divestment proceed to be utilized for deleveraging, which we expect could ease JSMR’s net DER to 1.4x/1.3x in FY24F/FY25F (vs 1.7x-2.4x in last 5 years). As not many of the new toll road projects will commence in FY24F/FY25F, we expect capex of Rp 7.3t/Rp 6t in FY24F/FY25F (vs. 2023 level at ~Rp 46t and FY17-19 average of Rp 23t), mostly for four Java toll roads with a total concession of 120km. We expect the capex cycle to resume from FY26F, given the robust ~348km new toll roads in the pipeline.

Reinitiate with a BUY rating and a TP of Rp 6,500 on higher tariff thesis

We reinitiate JSMR with a Buy rating and a DCF-based TP of Rp 6,500 (implying 8x FY25 EV/ EBITDA) based on our expectation of attractive core net profit growth of 28%/33% yoy in FY24F/FY25F, driven by tariff adjustment and the impact of deleveraging. We expect ROA to reach ~3% in FY24F-26E, surpassing FY17-19 average of 2.7%, despite the doubling concession. JSMR currently trades at -1 std dev 7-years mean, and has not priced in better ROA, net DER, or EBITDAM vs FY17-18, where JSMR is traded at >12x EV/EBITDA. Downside risks: 1) Failure to increase tariffs on major toll roads; 2) Slower traffic growth on new Transjava toll roads.

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