BBRI - Another solid quarter

KBVS Update
Tuesday, 5 Sept 2023

BBRI: Another solid quarter
(Maintain BUY; TP: IDR6,140)

•    BBRI’s 1H23 earnings came in above ours and street expectation at a run-rate of 50.7%/50.2% compared to 5yr hist average of 47%. On quarterly basis, net profit was 10.3% yoy higher and beating our ‘23F earnings for BBRI by 2.39%. Total loan continues to show a well shape growth at 8.8% yoy, despite flattish on quarterly basis (1.9% qoq), while TPF grew by 9.5% yoy helped by strong growth from CA (24.3% yoy) and hence made CASA portion improves by 40bps to 65%, or 10.1% yoy higher to IDR815.42tn.

•    Key performance continues stood within management forecast, with 1H23 NIM (7.9%) arriving at higher range of management guidance of 7.7%-7.9%, thanks to continuing asset mix improvement. Credit cost, which strongly improve (around -90bps yoy and -30bps ytd) from 3.11% in 1H22 to 2.26% is aligned with BBRI’s ‘23F target range of 2.2%-2.4%.

•    We expect earnings to continue record double digit growth in the remaining quarters of the year. Ours and street 2H23F earnings for BBRI is around IDR30.1tn and IDR32.3tn (cons.) respectively. Assuming the bank will reach KBVs and street 2H23F net profit, then BBRI FY23 earnings will grow stronger to around 14.6% yoy and 22.3% yoy (cons).

•    At this juncture the stock remains attractive. Despite the potential wait and see stance as election approaching, we think overall growth in 2023 will continue to be backed by (1) stable loan demand growth (2) steady CoF which could maintain NIM expansion to remain on track (3) continuing asset quality improvement (4) soft and normalized provisions as front load has been made as well as manageable cost to income ratio.

•    Maintain BUY with target price of IDR6,140. Our BBRI’s intrinsic value is derived from GGM with fair P/B ‘23F of 2.9x, while its currently trading at 2.7x or slightly above its +1SD 5-year historical of 2.6x ‘23F P/B. Risks to our call are: a) lower-than-expected loan growth, NIM and loan yield, b) higher than expected CoC and c) higher inflation, slowing economic activity and d) deteriorating asset quality.  

Regards,
Akhmad Nurcahyadi - KBVS Research