AMRT - Continuous business’ expansion, despite in a political year
KBVS Update
Thursday, 04 April 2024
AMRT - Continuous business expansion, despite in a political year
(Maintain BUY; TP: IDR3,500)
Currently, AMRT has a total of 22,310 stores in Indonesia. This year, AMRT plans to open around 1,450 new stores in total (includes 200 new stores with a store in store format). Thus, we expect AMRT' revenue to grow by 10.6% yoy in ‘24F on better consumers' purchasing power, its massive store’ numbers with more active loyal members.
We like AMRT' plan to open 200 new stores with a store in store format as the company could lower capex usage and labour costs, which helps its gross and EBIT margin to expand. Thus, we expect AMRT’ gross profit and EBIT to grow by 12.4% yoy and 18.6% yoy, with both margins to expand by 30bps yoy and 20bps yoy, respectively in ‘24F, on better product mix and cost management.
Thus far, AMRT’ fee based income, has supported its earnings growth yoy with a possibility of net margin expansion. Moreover, AMRT’ fee based income grew 6.3% yoy to IDR685 bn in 2023. As a result, we expect AMRT’ fee based income to grow by around 7% yoy in ‘24F due to higher numbers of its active members with more contributions.
In 2023, AMRT’ market share in Indonesia and MT’ minimarket grew by 90bps yoy and 200bps yoy, respectively. AMRT’ total members reached 16 mn people (+40.1% yoy) in 2023, with active members around 10.8 mn people (68% of total members). As a result, AMRT' revenue and net profit grew by 10.3% yoy and 19.2% yoy, respectively in 2023, with 30bps yoy net margin expansion. AMRT' FY23 earnings, came in-line with ours’ (99%), but slightly lower than consensus (96%).
Maintain BUY on AMRT with TP of IDR 3,500/share, which implies 36.1x ‘24 P/E or around +1 stdv of 5 years mean P/E. We have incorporated AMRT’ FY23 numbers, which also affected our ‘24F earnings. Yet, we still think AMRT’ premium valuation is justified on a) its continuous business growth and margin expansion, b) in a net cash position since 2021, and c) its ‘24F-‘25F’ ROE is superior than peers’ average ROE.
Regards,
Andre Suntono – KBVS Research Team