Maintain HOLD as the stock is already fairly valued
Key Takeaways
▪️Net income jumped +19.4% QoQ/+25.2% YoY to IDR12.6tn in 1Q23 forming 27.6%/26.8% of ours/cons estimate of FY23E earnings largely driven by lower CIR and CoC. Yet loan growth, NIM and CoC remain within management guidance.
▪️BMRI has successfully maintained prudent ALM. ~60% assets invested in loan and ~22% invested in government bond with short-medium maturity (>50%). Both LCR and NSFR still above the regulatory framework despite falling in 1Q23. Whereas intermediary role keep functioning with LDR of 86.2% as of the end of 1Q23. Hence we believe recent banking turmoil will have a minimum impact on BMRI.
▪️What we like from BMRI's 1Q23 performance is on the asset quality side. LaR has been consistently declining and recorded at 11.3% in the last quarter driven by lower NPL and Coll 1 restructured loan despite higher SML proportion. Adequate coverage with 303%/47% NPL/LaR coverage should provide a more manageable CoC while improving written off recovery rate would help non-interest income to increase.
▪️We maintain HOLD rating for BMRI with TP of IDR5,250/share (post stock split) implying 1.9/1.8x FY23F/24F P/B as the stock has been fairly valued : 1) currently traded at +2std P/B band due to +4.3% ytd appreciation and 41.3% annual return in FY22, 2) higher Cost of Equity (Ke) driven by raising stock beta reflecting volatility risk and 3) all the positive catalysts including substantial earnings jump and jumbo dividend were already priced-in.
▪️Potential upside and valuation re-rating will depend on the scenario of rate cut while attractive government bond valuation combine with higher risk premium would not incentive investors to hold equity.
MNCS Research
Disclaimer On
