Surya Semesta Internusa (SSIA IJ)

Potential Future Hub of Indonesia’s EV Ecosystem

• We believe SSIA's success in housing BYD could attract other players in the EV ecosystem, supported by the future main export port Patimban.
• We expect a 10% CAGR in net profit in FY25-29F, driven by 80-90ha sales in Subang and a 50% gross profit contribution from non-land business.
• We reinitiate SSIA with a Buy rating on attractive growth profile; our TP of Rp1,400 is derived from 73% discount to our revised RNAV.

Monetization of Subang Metropolitan Set to Drive Company’s Value

We believe that the success of SSIA for housing BYD in its Subang Smartpolitan lies in the preparedness of its infrastructure, manpower availability, and ability to serve the product’s market orientation. This could be a good precedent for other EV or EV component manufacturers to purchase land on the estate. While its location is slightly farther (~65 km or ~1-1.5hr. travel distance) than Suryacipta’s Karawang/DMAS’ Cikarang (exh.3), the future development of Patimban Seaport, which is expected to be the country’s main port of export, could make Subang an attractive destination to house export-oriented high-value manufacturing companies. Thus, we believe that SSIA’s key story will lie in its success in monetizing the potential of Subang to be the future hub of the EV ecosystem, with more ample land availability compared to the Cikarang area.

Expect a 10% CAGR in FY25F-29F Net Profit from 80-90ha Subang Sales/year

SSIA’s differentiation with other industrial estate peers are: 1) stable recurring revenue franchise, through network of hotels (e.g. Umana and Melia Bali, Gran Melia Jakarta), which account for 15% of revenue; 2) NRCA as one of the leading private-construction companies in Indonesia, thus providing cushion during any risks of weak marketing sales (exh.5). In terms of marketing sales, we believe the company will be able to meet its FY24F target of 164ha in Subang and 20ha in Karawang, which we estimate to reach Rp2.2tr in value. Management also indicated that BYD land sales of 108ha in 1H24 are on-track for handover in Dec24, thus, we expect this to translate into an FY24F net profit of Rp572bn (+224%yoy). For FY25-29F, we project the company to book a CAGR net profit of 10%, driven by a stable 80-90ha of land sales/year in Subang (with 5-7% ASP increases, post full-operation of Patimban Toll Road by ~FY27F), and a 50% portion of gross profit from its non-land business.

Reinitiate with a Buy and TP of Rp1,400; Top Pick in the Sector

We reinitiate SSIA with a Buy rating on its attractive earnings growth profile from Subang’s future value potentials to become EV-hub. Our TP of Rp1,400 is based on a 73% (+0.5SD of historical mean) disc.to our revised RNAV. We believe the key risk lies in the development of overall Subang infrastructure, especially the access road to Patimban Seaport, which involves other parties that could delay future land sales inquiries. The latest management update, however, shows that construction will begin in 4Q24 (exh.4).

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