Comprehensive Financial Analysis of Sumber Alfaria Trijaya

Date of Report: Wednesday, 04 December 2024

Broker Name: UOB Kay Hian

Introduction to Sumber Alfaria Trijaya

Sumber Alfaria Trijaya, a dominant player in Indonesia’s convenience store market, operates leading chains such as Alfamart, Alfamidi, Lawson, and Dan+Dan. With an expansive network of about 23,000 stores across the nation, the company is positioned as the market leader in the retail sector.

Stock Overview and Market Position

The company’s stock is listed under the ticker AMRT IJ in the retail sector, with a share price of Rp2,900. Sumber Alfaria Trijaya has set a target price of Rp3,400, indicating a 17.2% upside potential. Major shareholders include Sigmantara Alfindo PT, Morgan Stanley, and Jonathan Chang, holding 53.19%, 8.81%, and 5.44% respectively. The market cap stands robustly at Rp120,421.0 billion.

Investment Highlights and Strategic Expansion

In a strategic move to bolster growth, Sumber Alfaria Trijaya plans to open 1,500-2,000 new stores annually, focusing on regions outside Greater Jakarta and Java. The targeted same-store sales growth (SSSG) is pegged at 4-6% annually. The company aims to enhance margins by launching higher-margin stores and expanding its high-margin product portfolio, including ready-to-drink beverages and the Bean Spot Coffee brand.

Growth Prospects and Financial Forecasts

In 2024 and 2025, the company anticipates a rise in net profit after tax (NPAT) by 9.7% and 18.0% respectively, with a projected three-year compound annual growth rate (CAGR) of 16.5%. This optimism is based on a consistent opening of 1,750 stores per annum and improved operating leverage due to higher-margin products.

Performance by Store Type

• Alfamart Stores: Encompassing a size of 100 sqm, these stores carry fast-moving consumer goods and generate a 20-21% gross margin. The company plans to open 1,000-1,200 Alfamart stores annually.
• Alfamidi Stores: With a focus on fresh foods, these 250-350 sqm stores generate a higher gross margin of 24-25%. The expansion plan includes 200 new stores each year.
• Lawson Stores: Known for their ready-to-eat food offerings, Lawson stores boast a 30% gross margin. The company intends to open 50-100 new stores annually.
• Dan+Dan Stores: Specializing in cosmetics and skincare, these stores are planned for a modest expansion of fewer than 50 stores annually.

Operational Efficiency and Margin Expansion

To boost operational efficiency, Sumber Alfaria Trijaya is reducing the headcount per store from six to five and has installed solar panels in 46 warehouses to cut costs. The company’s net margin has seen a significant expansion from 1.40% in 2020 to 3.20% in 2023, attributed to economies of scale and a diversified product mix.

Financial Snapshot and Valuation

For the year ending 2023, Sumber Alfaria Trijaya reported a net turnover of Rp106,945 billion and an EBITDA of Rp4,496 billion. The company is on a growth trajectory, with expectations of net turnover reaching Rp150,758 billion by 2026. With a strategic focus on high-margin products and improved operational leverage, AMRT has initiated coverage with a BUY recommendation and a target price of Rp3,400.

Conclusion

Sumber Alfaria Trijaya’s strategic initiatives and robust expansion plans position it for continued growth in the competitive retail market. Investors can look forward to potential high returns, supported by the company’s comprehensive approach to enhancing margins and operational efficiency.