Positioned to Benefit from New Plant
Key Takeaways :
• ARNA FY22 revenue is relatively flat +1.2% YoY to IDR2.6tn. This was driven from the lower-than-anticipated sales volume by -1.6% YoY to 66.6 mn sqm (vs 67.7 mn sqm in FY21), which was partly offset by solid product mix.
• ARNA managed to deliver impressive net profit at IDR576.2bn. This positive result came from higher operating profit (+23.1% YoY) given its decent cost leadership impacting on the stable OPEX (-1.7% YoY). Therefore, NPM edged up to 22.3% (vs 18.4% in FY21).
• ARNA released its new plant 5C in Mojokerto, East Java. This plant is able to produce 4.4mn sqm/year ceramics, translating the total capacity to reached 68.8mn sqm/year (vs 64.4mn sqm/year).
• Despite the declined sales volume, outlet distribution experienced an increase of +5.7% YoY to 46 sub-distributors & 39,918 outlets in FY22, thus increasing its product absorption.
• To date, the regulation of ODOL (Over Dimension Over Load) has not yet been put into practice, due to the lack of nation truck vehicles. The USD6/MMBtu gas price for the ceramic sector was in the process to be Government Regulation (PP), which has a greater level of legal authority. Both of these will benefit ARNA, in our view.
• We recommend BUY for ARNA IJ with a TP of IDR1,350, implying PE/PBV of 15.7x/4.7x in FY23E. ARNA trades at an undemanding valuation of 12.6x PE, near at the level -2.0 STD PE (5-year average). Downsides risk including: 1) lower sales volume; 2) massive sales of imported products; 3) higher than expected logistic cost.
MNCS Research
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