Midi Utama Indonesia (MIDI.IJ Rp 432; BUY TP Rp 600) Strong 1H24 Earnings Bolster FY24 Guidance; Focus on Profitability Enhances Outlook

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Midi Utama Indonesia (MIDI IJ)

Strong 1H24 Earnings Bolster FY24 Guidance; Focus on Profitability Enhances Outlook

MIDI set higher FY24 SSSG, revenue and net profit guidance following strong 1H24 earnings, while aiming to reduce losses at Lawson in 2H24.
We have revised down our FY24 net profit estimate by 2.9%; we now forecast FY24-25F NP growth of +16%/22% yoy.
We view the management’s focus on profitability and Alfamidi expansion as positive. Reiterate our Buy rating with unchanged TP.

Higher SSSG target, revenue and net profit guidance post strong 1H24 result

Following strong 1H24 net profit growth of 25% yoy, MIDI raised its FY24 SSSG target to 8% (vs. 6% prev.) and lifted its revenue and net profit growth guidance to 13% (up from the prev. 11%), while maintaining a gross margin of approximately 26%. The management also indicated that July SSSG remained in the low-teens (vs 2Q24: 9.6%). MIDI is on track to open 200 new Alfamidi stores this year, having opened 75 new locations in 1H24, with 119 stores currently under renovation and slated to open in 2H24. For Lawson, MIDI added only 3 new stand-alone stores, bringing the total to 696 Lawson stores in 1H24. The company plans to continue reviewing Lawson stores with negative EBITDA and may close some to maintain profitability.

Lawson’s Focused Store Openings and Profitability drives better FY24 Outlook Following Lawson’s Rp40bn loss in 1H24, management plans to boost earnings in 2H24 with a conservative store opening strategy focused on profitability. We revised down our FY24/25F store targets by 3.9% and 5.8%, now assuming 60 new stores in FY24 (down from FY24/25F of 190/140). However, our forecast for 200 and 170 new Alfamidi stores in FY24/25F remains unchanged. Despite assuming fewer store openings, we expect improved revenue per store for both Alfamidi and Lawson, supporting 3.4% revenue growth in FY24 and 2.1% in FY25. Lawson’s revamp leads to higher non-controlling interest at Rp52bn and Rp23bn in FY24/25F. This leads to 2.9% lower net profit for FY24F. However, we maintain net profit for FY25, supported by major contributions from Alfamidi and a reduced pace of store expansion for Lawson.

Sensible focus on profitability reinforces our Buy rating

We view MIDI’s plan to prioritize Lawson’s profitability through cautious expansion as a positive, earnings-accretive move. With Alfamidi contributing 77% of total stores and 93% of revenue, and with 90% of these stores being mature, we believe MIDI’s growth story remains intact. Additionally, 50% of the stores are located outside Java, where they are generating solid growth. Thus, we reiterate Buy rating with an unchanged target price of Rp600, implying FY25F P/E of 25.3x.

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