Aspirasi Hidup Indonesia (ACES IJ)
Elevated input, freight & operating costs triggers earnings downgrade
- AZKO’s 1Q26 sales showed some recovery (+10.1/2.1% yoy/ qoq), though Apr26 run rate soften expectedly due to Eid timing shifts.
- Mgmt implemented selective ASP hike across mass products to offset rising costs and support margin stability starting on Apr26.
- We trimmed our FY26-27F earnings estimates by -15.9/24.7% and reiterate Buy rating with lower TP of Rp450.
Topline recovery in 1Q26, though margins compressed on elevated costs
AZKO posted revenue improvement in 1Q26, rising 10.1% yoy and 2.1% qoq, exceeding management’s FY26 sales growth guidance of 6-8%. Management noted that Eid-related demand during H-7 to H+7 period was stronger compared to last year, supported by a 5.9% yoy increase in conversion rates and 2.3% yoy rise in basket size. As expected, Apr26 SSSG of 2.4% was softer due to the timing shift of the Eid and holiday season, yet this is still within the 2-4% guidance. Meanwhile, gross margin contracted by 170bps yoy in 1Q26, primarily attributable to higher freight costs from China, 5-10% increase in raw material prices, and continued IDR depreciation against the CNY.
ASP hikes implemented across mass products to mitigate cost pressure
Management has begun adjusting prices to approximately 5k SKUs by around 10% starting in Apr26, with another 5k SKUs scheduled for price revisions in May, aimed at partially offsetting higher input costs and preserving margins. We expect the ASP adjustment cycle to be largely completed by the end of 2Q26. While there are concerns that higher prices could weigh on demand, management indicated that the impact has so far been limited, supported by selective pricing adjustments across different geographical areas. The price increases have also enabled AZKO to sustain its gross margin at a level broadly in line with last year, which remains management’s key margin objective for FY26.
Earnings estimates revisions
We slightly revise our topline growth assumptions by -1.1/+0.6% in FY26/27F, implying revenue growth of 6.5/8.0% yoy, respectively. We believe the sales recovery this year will be driven by continued store expansion, ASP adjustments, and a lower base effect from last year. Our revised forecasts incorporate the addition of 25 new AZKO stores and FY26 SSSG of 1% (vs. -4.2% in FY25). We also anticipate gross margin to contract by 20bps in FY26F, as elevated input and logistics costs are partially offset by ASP hikes. Meanwhile, following its 1Q26 results, we raise our assumptions for A&P as well as salary and employee allowances, resulting in total opex accounting for 39.5% of total sales in FY26F. Consequently, we cut our FY26/27F earnings by 15.9/24.7%, respectively.
Maintain Buy with lower TP of Rp450
We maintain our Buy rating on AZKO as we expect earnings growth recovery this year following a softer performance last year, while valuations remain attractive. We lowered our TP to Rp450 post-earnings estimates revision, implying 11.1x PE FY26F (-1std of 3yr mean). AZKO is currently trading at 8.6x PE FY26F.
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