Ace Hardware Indonesia BUY (upgrade)

Company Update | Consumer Discretionary | ACES IJ | 01 April 2024

Company Update | Consumer Discretionary | ACES IJ | 14 January 2021
xxxxx | xxxxx | xxxx
Stock Data
Target price Rp1,080
4Q23 results: beat amidst sales
Prior TP Rp890 recovery and costs discipline
Current price Rp910
Upside/downside 18.6%
 ACES booked FY23 net profit of Rp764bn (+14.9% yoy), above
Shares outstanding (mn) 17,150
our/consensus estimate at 108/106%.
Market cap (Rp bn) 15,607  4Q23 net profit of Rp274bn was driven by robust sales and GPM; We
Free float 40% upgrade ACES FY24/25F earnings by +4/6% post robust FY23 results
Avg. 6m daily T/O (Rp bn) 41  Upgrade to BUY with TP of Rp1,080 as ACES still trades at 18.2x
FY24F PE lower compared to regional peers’ (avg: 20.6x FY24F P/E)
Price Performance
FY23 profits beat expectations
3M 6M 12M ACES’s FY23 net profit of Rp764bn (+14.9% yoy) was above our/consensus
Absolute 26.4% 21.3% 90.4% estimate at 108/106%. Net sales grew +12.6% yoy on the back of FY23
Relative to JCI 27.3% 17.5% 84.5% SSSG of 8.1%. In terms of profitability, GPM/EBIT margin slightly improved
52w low/high (Rp) 440 – 930 by +26/30bps to 48.6%/11.3%. Opex to sales ratio was relatively unchanged
yoy at 37.2%, bringing net profit margin to 10.0% (+21bps yoy). Inventory
35%
days improve to 255 days in Dec23 vs. Dec22’s 270 days.
30%

25% 4Q23 driven by strong sales growth and GPM attainment

20% 4Q23 net profit of Rp274bn was -12.2% lower yoy due to one-off employee
15%
benefit expense reduction of c.Rp87bn in 4Q22. Adjusting for this, 4Q23’s net
10%
profit grew by +13.9% yoy. 4Q23 sales rose +13.4% yoy on the back of c.9%
5%

0%
SSSG for the quarter. GPM expanded by +138bps yoy/ +211bps qoq, partly
-5% driven by toys’ segment margin recovery and product mix (potentially higher
private labels sales), in our view. In 4Q23, ACES has opened 5 stores taking
JCI Index ACES IJ the FY23 store opening count to 13 stores. In 1Q24, the company has
opened another 4 stores YTD.
Major Shareholders Expect further re-rating on SSSG recovery and store productivity
PT Kawan Lama Sejahtera 60.0% Reflecting the robust FY23 results, we upgrade our FY24/24F earnings by
4.2/6.1%. As discussed in our recent report, our FY24F SSSG estimate of
+6.5% has room to deliver positive operating leverage on the back of benign
wage growth this year (FY24F EBIT margin improvement of +75bps yoy),
even after accounting for Apr-Dec23’s normalized base effect. Furthermore,
we think that ACES’s store productivity has been the leading indicator for P/E
valuation multiple (Fig 3).
Upgrade to BUY with TP of Rp1,080 as ACES still trails regional peers
We upgrade our rating on ACES to BUY as we expect further re-rating from
further store productivity improvement in FY24F. Additionally, ACES is still
trading at lower valuation of 18.2x FY24F P/E to regional home-improvement
retailer peers (FY24F P/E of 20.6x). Our TP of Rp1,080 is based on 21.5x
FY24F PE (-0.5 s.d. from its 5yr avg). Key risk is worsening SSSG.
Financial Summary (Rp bn) 2022A 2023A 2024F 2025F 2026F
Revenue 6,763 7,612 8,249 9,017 9,850
EBITDA 894 1,006 1,151 1,288 1,422
Lukito Supriadi Net profit 702 764 857 965 1,071
PT Indo Premier Sekuritas EPS (Rp) 41 45 50 56 62
EPS growth 1.6% 8.8% 12.2% 12.7% 11.0%
[email protected]
ROE 12.2% 12.6% 13.6% 14.6% 15.5%
+62 21 5088 7168 ext. 716 PER (x) 22.2 20.4 18.2 16.2 14.6
EV/EBITDA (x) 15.1 13.2 9.8 8.8 8.8
Dividend yield 3.5% 3.5% 3.8% 4.3% 4.9%
Andrianto Saputra Forecast change 4% 6% N/A
IPS vs. consensus 104% 100% 89%
PT Indo Premier Sekuritas
Source: Company, Indo Premier Share price closing as of: 01 April 2024
[email protected]
+62 21 5088 7168 ext. 712

Refer to Important disclosures in the last page of this report

 01 April 2024
Consumer Discretionary
Ace Hardware Indonesia

Fig. 1: ACES 4Q23 Result summary

IPS Cons
(Rp bn) 4Q23 4Q22 % YoY 3Q23 % QoQ 12M23 12M22 % YoY % IPS % Cons Comment
FY23F FY23F

Net sales 2,118 1,868 13.4% 1,859 14.0% 7,612 6,763 12.6% 7,573 101% 7,468 102% In-line
COGS (1,064) (964) 10.4% (973) 9.4% (3,914) (3,495) 12.0%
Gross profit 1,054 903 16.7% 885 19.0% 3,698 3,268 13.2%
Opex (726) (516) 40.7% (690) 5.2% (2,835) (2,521) 12.4%
EBIT 328 388 -15.4% 195 67.8% 863 747 15.6% 798 108% 822 105% Above
Other income (charges) 36 5 599.7% 28 25.9% 90 74 21.3%
PBT 364 393 -7.4% 224 62.5% 953 821 16.1%
Tax benefit (expense) (90) (75) 20.4% (38) 136.2% (189) (147) 28.5%
Net profit 274 313 -12.2% 187 47.0% 764 664 14.9% 706 108% 721 106% Above
Core profit 274 241 13.9% 187 47.0% 764 634 20.5%

Margin (%)
Gross margin 49.7% 48.4% 1.38% 47.6% 2.11% 48.6% 48.3% 0.26%
EBIT margin 15.5% 20.8% -5.27% 10.5% 4.97% 11.3% 11.0% 0.30%
Net profit margin 13.0% 16.7% -3.78% 10.0% 2.91% 10.0% 9.8% 0.21%
Opex to sales -34.3% -27.6% -6.65% -37.1% 2.86% -37.2% -37.3% 0.04%
*Based on net sales

Source: Company, Bloomberg, Indo Premier

Fig. 2: ACES Forecast changes

2024F 2025F 2024F 2025F 2024F 2025F
Key Driver
SSSG (% ) 6.5% 5.0% 6.5% 5.0% 0.0% 0.0%

Financial Performance
Gross Sales (Rp bn) 8,802 9,576 8,665 9,472 -1.6% -1.1%
Net Sales (Rp bn) 8,324 9,056 8,249 9,017 -0.9% -0.4%
Gross profit (Rp bn) 3,990 4,332 4,048 4,452 1.5% 2.8%
EBIT (Rp bn) 934 1,035 1,000 1,128 7.1% 8.9%
Net profit (Rp bn) 822 910 857 965 4.2% 6.1%

Margins (%)
Gross margin 47.9% 47.8% 49.1% 49.4% 1.1% 1.5%
Operating margin 11.2% 11.4% 12.1% 12.5% 0.9% 1.1%
Net profit margin 9.9% 10.1% 10.4% 10.7% 0.5% 0.7%

Growth (%)
Gross sales growth (yoy) 9.9% 8.8% 8.4% 9.3% -1.5% 0.5%
Net sales growth (yoy) 9.9% 8.8% 8.4% 9.3% -1.5% 0.5%
Net profit growth (yoy) 16.4% 10.7% 12.2% 12.7% -4.3% 2.0%
Source: Company, Bloomberg, Indo Premier

Page 2 of 6
Refer to Important disclosures in the last page of this report
 01 April 2024
Consumer Discretionary
Ace Hardware Indonesia

Fig. 3: ACES PE multiple vs. sales productivity

50.0 18.0

45.0 17.0

40.0
16.0
35.0
15.0
30.0
14.0
25.0
13.0
20.0
12.0
15.0

10.0 11.0

5.0 10.0
Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23

P/E Cummulative 12M Sales/sqm (Rp mn/sqm) t-1 (RHS)

Source: Company, Bloomberg, Indo Premier

Fig. 4: Regional’ retailer valuation summary

Cur. Mkt cap P/E EPS Grow th
Ticker Nam e Region
USD m n FY24F FY25F FY24F FY25F
ACES IJ Equity Ace Harw are Indonesia Indonesia 959 18.2 16.2 12.2% 12.7%
GLOBAL TB Equity Siam Global House PCL Thailand 2,375 25.2 22.6 12.8% 11.4%
HMPRO TB Equity Home Products Center PCL Thailand 3,834 19.8 18.3 4.3% 8.4%
MRDIY MK Equity MR. DIY Group Malaysia 2,979 22.0 19.6 9.8% 12.5%
WLCON PM Equity Wilcon Depot Phillipine 1,296 15.3 13.2 15.1% 16.2%
Sim ple Average 20.1 18.0 10.8% 12.2%
Regional Average (ex-ACES) 20.6 18.4 10.5% 12.1%

Source: Bloomberg, Indo Premier

Fig. 5: ACES is traded at 17.7x fwd. 12M PE (-0.9s.d. from its 5yr avg)
50.0

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0
Jan-18

Jul-18

Jan-19

Jan-20
Apr-18

Oct-18

Apr-19
Jul-19
Oct-19

Apr-20
Jul-20
Oct-20
Jan-21

Jan-22

Jan-23
Apr-23
Apr-21
Jul-21
Oct-21

Apr-22
Jul-22
Oct-22

Jul-23
Oct-23
Jan-24

ACES PE band 5-yr average +1 s.d. +2 s.d -1 s.d. -2 s.d.

Source: Bloomberg, Indo Premier

Page 3 of 6
Refer to Important disclosures in the last page of this report
 01 April 2024
Consumer Discretionary
Ace Hardware Indonesia

Income Statement (Rp bn) 2022A 2023A 2024F 2025F 2026F

Net revenue 6,763 7,612 8,249 9,017 9,850
Cost of sales (3,495) (3,914) (4,201) (4,565) (4,958)
Gross profit 3,268 3,698 4,048 4,452 4,892
SG&A Expenses (2,521) (2,835) (3,048) (3,324) (3,641)
Operating profit 747 863 1,000 1,128 1,251
Net interest 47 74 (55) (54) (52)
Forex gain (loss) 15 (5) 0 0 0
Others 49 21 120 127 134
Pre-tax income 858 953 1,065 1,201 1,333
Income tax (147) (189) (209) (235) (261)
Net income 702 764 857 965 1,071

Balance Sheet (Rp bn) 2022A 2023A 2024F 2025F 2026F

Cash & equivalent 2,133 2,312 2,339 2,392 2,392
Receivable 86 199 114 125 137
Inventory 2,811 2,665 2,516 2,671 2,833
Other current assets 333 486 637 682 682
Total current assets 5,363 5,662 5,602 5,858 5,858
Fixed assets 426 406 383 354 319
Other non-current assets 0 0 0 0 0
Total non-current assets 1,886 2,073 2,164 2,137 2,103
Total assets 7,249 7,735 7,610 7,864 7,864

ST loans 0 0 0 0 0
Payable 144 126 195 212 231
Other payables 7 15 62 67 73
Current portion of LT loans 0 0 0 0 0
Total current liab. 670 764 768 801 837
Long term loans 0 0 0 0 0
Other LT liab. 196 202 212 222 233
Total liabilities 1,315 1,567 1,581 1,624 1,671

Equity 612 612 612 612 612

Retained earnings 5,312 5,565 5,823 6,117 6,431
Minority interest 44 43 43 43 43
Total SHE + minority int. 5,934 6,186 6,444 6,738 7,052
Total liabilities & equity 7,249 7,753 8,025 8,362 8,723
Source: Company, Indo Premier

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Refer to Important disclosures in the last page of this report
 01 April 2024
Consumer Discretionary
Ace Hardware Indonesia

Cash Flow Statement (Rp bn) 2022A 2023A 2024F 2025F 2026F
Net income 702 764 857 965 1,071
Depr. & amortization 105 109 151 161 170
Changes in working capital (718) (30) 67 (176) (185)
Others 530 514 0 0 0
Cash flow from operating 619 1,356 1,075 950 1,057
Capital expenditure (70) (89) (128) (132) (135)
Others (32) (41) (105) 0 0
Cash flow from investing (102) (131) (233) (132) (135)
Loans 0 1 0 0 0
Equity 12 (1) 0 0 0
Dividends (550) (550) (599) (672) (757)
Others (401) (491) 0 0 0
Cash flow from financing (939) (1,042) (599) (672) (757)
Changes in cash (423) 184 243 146 164

Key Ratios 2022A 2023A 2024F 2025F 2026F

Gross margin 48.3% 48.6% 49.1% 49.4% 49.7%
Operating margin 11.0% 11.3% 12.1% 12.5% 12.7%
Pre-tax margin 12.7% 12.5% 12.9% 13.3% 13.5%
Net margin 10.4% 10.0% 10.4% 10.7% 10.9%
ROA 9.7% 10.2% 9.3% 9.9% 9.9%
ROE 12.2% 12.6% 13.6% 14.6% 15.5%

Acct. receivables TO (days) 4.1 6.8 6.9 4.8 4.9

Inventory TO (days) 270.4 255.3 225.0 207.3 202.6
Payable TO (days) 14.2 12.6 13.9 16.3 16.3

Debt to equity 0.0% 0.0% 0.0% 0.0% 0.0%

Interest coverage ratio (x) N/A N/A 10.0 11.2 12.5
Net gearing -36.2% -37.6% -37.8% -37.4% -37.4%
Source: Company, Indo Premier

Page 5 of 6
Refer to Important disclosures in the last page of this report
 01 April 2024
Consumer Discretionary
Ace Hardware Indonesia

INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the
subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in the report.

DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any
representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness.
Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any
recommendations contained in this document do not have any regard to the specific investment objectives, financial
situation and the particular needs of any specific addressee. This document is not and should not be construed as an
offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT Indo Premier Sekuritas or its
affiliates may seek or will seek investment banking or other business relationships with the companies in this report.