Midi Utama Indonesia (MIDI IJ)

Resilient Growth Prospect Despite Macro Headwinds

• MIDI should benefit from the rebound in ex-Java store’s SSSG in May, as ~53% of its stores located in ex-Java. 
• We maintain our positive growth outlook with +8.5% and +29.6% yoy revenue and net profit growth forecast in FY25F.
• We reinitiate with a Buy rating and TP of Rp550. Its curr. val of 19.7x PE FY25F seems premium yet we think remains warranted given the growth prospects. 

Weaker-than-expected Java island’s performance, ex-Java rebounded

MIDI reported +6% yoy revenue growth in 1H25 (-2.9% yoy/ -12.3% qoq in 2Q25 due to the shift in Eid period), higher than the national modern trade (MT) sector of +0.1% yoy. Consistent with the industry data, the management noted that purchasing power was relatively soft in 2Q25, with Java’s underperformance dragging overall results. Mgmt. indicated that Java’s SSSG remain in negative territory up to Jul25, while ex-Java areas rebounded to positive territory in May25. We believe this is positive for MIDI, as approx. 53% of its stores located in ex-Java. In 1H25, MIDI achieved a net addition of 51 stores (Alfamidi 44 stores, Alfamidi super 8, Midi fresh -1), bringing its total stores to 2,486, slightly behind management’s target of 200 stores.

Resilient growth outlook amid weak purchasing power

Despite current macro backdrop, we remain optimistic on MIDI’s growth potential as we expect the company to sustain its resilient sales performance.  We project +8.5% revenue growth in FY25F, driven by 4.7% SSSG and a more conservative assumption of 170 new store openings. Additionally, with no expected losses from subsidiary in 3Q25 and 4Q25, we anticipate +29.6% yoy increase in net profit, with net margin standing at 3.3%. The management highlighted both personal care and frozen food products continue to deliver double digit growth, helping to support MIDI’s SSSG. Meanwhile, categories such as cigarettes (downtrading to cheaper brands), beverages, snacks and biscuits remain under pressure. The company’s latest initiative, “JA~DI” (Jajan di Alfamidi), introduced within Alfamidi stores, has yielded positive initial results. Currently available in 237 Alfamidi stores, the program has contributed ~2-3% uplift in sales at those stores. Mgmt is targeting to expand JA~DI to ~400 stores by year end.

Resuming coverage with a Buy rating and a TP of Rp550

We resume our coverage on MIDI with a Buy rating supported by its resilient growth outlook amid a challenging macro environment with ongoing expansion plans. The company aims to achieve a more sustainable net margin of 4% next year post Lawson’s divestment. Our TP of Rp550 is based on 22.2x PE target, reflecting the 3yr mean. While MIDI’s current valuation at 19.7x PE FY25F is at premium relative to its peers, we believe this valuation remains warranted given the solid growth prospects.

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