ACES - Heading towards a brighter 2024

KBVS Update
Friday, 10 Nov 2023

ACES: Heading towards a brighter 2024
(Re-initiate BUY; TP: IDR1,025)

Ace Hardware Indonesia' (ACES) 9M23 revenue grew 12.2% yoy due to discount and promotion events, which came in-line with ours and consensus' expectations of 73.8% and 74.8%. Note that, historically ACES 9M revenue achievement was around 72% of its full year revenue.

ACES' net profit grew 38.1% yoy net with 160bps yoy net margin expansion in 9M23, mainly due to the positive impact of higher productivity in 3Q23. This came at 65.2% and 68.5% of ours and consensus’ expectations or higher than its historical 9M achievement in the past 2 years (around 50% in average).

ACES has increased its Same Store Sales Growth (SSSG) guidance from 5% to 6.5%. We expect ACES revenue to grow by around 10% yoy with 6.5-7% SSSG in ‘23F and ‘24F, respectively on the back of more store openings and festive events.

ACES' 9M23 EBIT margin expanded 240bps yoy on better cost management and higher productivity. Thus, we expect ACES’ operating profit to grow by around 11% yoy in ‘23F due to higher productivity or sales per employee (+6.6% yoy). All in all, we expect ACES’ net profit to grow by around 12% yoy with a 20bps yoy and 10bps yoy net margin expansions in ‘23F and ‘24F.  

Re-initiate our coverage on ACES with a BUY and TP of IDR1,025, which implies 21.1x ‘24F P/E or around its -0.75SD of 5 years mean P/E. Currently, ACES is trading at 16.8x ‘24F P/E or at -1.25SD of 5 years mean P/E.

Regards,
Andre Suntono - KBVS Research