Mitra Adiperkasa (MAPI IJ)

Looking beyond the archipelago

We reiterate our BUY call on MAPI with an unchanged TP of IDR2,300 (-0.5SD of its 4-normal years PE-target at 17.4x) as we maintain our FY23F earnings estimate of IDR2.2tn driven by 17.4% topline growth with +16.4% yoy opex growth. We also assume a lower gross margin of 43.9% stemming from MAPI’s strategy to selectively adjust its selling prices to maintain sales volume. MAPI remains our top pick in the sector.

Decent 1H23 performance. MAPI is one of the best performers in the retail sector as the company has benefited from better mall traffic and resilient spending from the mid to upper segment. This translated to IDR639bn of net profits in 2Q23 (+27.7% yoy, +58.1% qoq) backed by 22.9% yoy topline growth and better gross margins of 46.4% (2Q22: 44.3%, 1Q22: 45.6%). For 2H23, we assume higher growth as 4Q is seasonally the strongest quarter with a 28-30% contribution to FY net profits backed by the end-of-year holiday season.

Different strategies for each regional country. MAPI’s expansion outside Indonesia suggests that the company is aware of the different market characteristics and competitive landscape in each Southeast Asian country. We believe that since MAPI’s performance in Indonesia is proven, it can leverage on the brand exclusivity from the principals in other countries, such as Foot Locker in Philippines and Inditex group in Vietnam. While for Thailand, MAPI has implemented a different strategy by partnering with Central group to build shop-in-shop (379 outlets by June 2023), benefitting from lower capex. In turn, this should translate into a higher ex-Indonesia revenues contribution of 30-40% in the next 3-4 years compared to just 9.7% in 1H23.

Expect FY23F net profits of IDR2.2tn. The top line is expected to grow by 17.4% this year with lower gross margins of 43.9% (FY22: 44.7%). Our gross margins assumption reflects MAPI’s selective price adjustments strategy and the higher contribution from its lower-margin Apple distributor business. This year, MAPI has already set aside IDR2tn for capex to open 700 gross additional new stores with the majority being MAPA outlets (around 400 new outlets) with 50% in overseas locations. MAPI also recently launched Sports Direct, the UK brand with different positioning compared to Sport Station and Planet Sports, as it offers several non-MAPI brands, such as Puma, Nike and Under Armour. 

Maintain BUY: TP of IDR2,300. BUY maintained with an unchanged TP of IDR2,300 implying a 17.4x 2023F PE target multiple at -0.5SD the 4-normalized years pre-pandemic (4-years mean of 21.3x).

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