Aspirasi Hidup Indonesia (ACES IJ)

Setting a Low Base for FY26F Upside; Upgrade Rating to Buy 

• Although we expect revenue to improve in 4Q25, the management expects FY25F revenue growth and SSSG to remain modest.
• We lowered our FY25F est. following 9M25 results but expect FY26 earnings recovery of +15.5% supported by cost optimization and a low-base effect.
• We upgrade our rating to Buy with a higher TP of Rp550, as the stock trades at a 3-year low 8.8x PE FY26F. 

Expect some improvement in 4Q25, yet FY25F growth likely to remain modest

Following the 9M25 achievement, the management is now anticipating FY25 revenue growth to be flattish to low single digit, with SSSG ranging from a slight decline to flat. New store opening target of 25-30 stores for this year remains intact, with 19 new stores launched as of 9M25. The management indicated that Oct25 SSSG is improving compared to Sep25, despite still in negative territory. We foresee some sales improvement in 4Q25, driven by the year-end festive demand, which has historically been AZKO’s strongest performing quarter.

Recent AZKO’s initiatives: new store concept & Neka

• AZKO has completed its new concept stores at Pondok Indah and Living Plaza Bintaro as part of its store rejuvenation program. These revamped stores offer a much-refreshed ambience with a curated product assortment tailored for higher-end customers and enhanced shopping experience. AZKO plans to replicate this concept to other stores located in A and A+ class malls.
• AZKO has also launched a new brand, “Neka”, aimed at the mid to lower segment. Neka stores feature a smaller footprint <700sqm and carry >10k SKUs of home and lifestyle essentials. The company has operated 4 pilot stores located in Serang, Bogor, Ciledug, and Ciputat currently, and aim to have total of 5-10 stores by year-end, with a faster rollout planned next year. Management noted that Neka’s gross margin and productivity are broadly comparable to AZKO’s current performance, while its BEP is expected to be within 1-2 years (vs. AZKO’s 6 months).

Upgraded to Buy with higher TP Rp550 on valuation & growth recovery

We trimmed our FY25/26F revenue and earnings estimates by -1.9%/ -1.9% and -13.0/-10.1%, respectively post 9M25 achievements. While the current macro situation remains challenging for AZKO’s sales performance this year, we believe a more stable govt fiscal stimulus in FY26F should have a positive impact on sales. Therefore, our new revenue estimates imply a modest +2.1% yoy in FY25F before improving to +6.2% yoy in FY26F. And with the continuous efforts to maximize costs and opex, we project earnings to recover to +15.5% yoy in FY26F (from -20.1% in FY25F), supported by a low-base effect. We upgrade our rating to Buy with a higher TP of Rp550 as we roll over our valuation to FY26F, implying 12.6x PE. AZKO currently trades at a 3-year low 8.8x PE FY26F, suggesting limited downside risk from current level given the projected growth recovery, in our view.

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