Holding equity seems to be riskier now, despite aggregate earnings jumped beating our estimates
Key Takeaways :
▪️ 51 out of 57 (89.5% of MNCS universe that constituted ~60.7% JCI) have reported an aggregate earnings jumped by +26.5% in 1Q23 equivalent to 28% run rate of FY23E aggregate net profit.
▪️ Sectors that reported earnings in-line with our estimate : property, banking and basic industry, whereas sectors beating our estimates including : consumers, metal, coal, automotive and heavy equipment, others were below our expectation.
▪️ Non-banking aggregate revenue increased by +12.5% YoY to IDR460tn, EBITDA grew +4.9% YoY but EBITDA margin shrank by -160 bps YoY. This may also reflect higher input cost as inflation increased along with other fiscal policy.
▪️ Banking net income rose by +30.8% YoY contributing 48% of ours aggregate earnings. NIM still expanding despite substantially higher CoF but could be offset by loan yield repricing, higher loan growth, a more efficient CIR and improving asset quality resulting to lower CoC.
▪️ Tech race for profit continued. GTV and TPV recorded quarterly contraction but net revenue increased pointing higher monetization. GOTO is well positioned and ahead of peers as indicators of ecosystem size, growth, portfolio, take rate and EBITDA improvement outperforming others.
▪️ We maintained a tactical neutral view on JCI movement as long as lower government bond yield is not accompanied by changing yield curve shape. Flattening yield curve has shown to disincentivize to hold equity on the back of EPS growth moderation and margin contraction.
▪️ Our assumption if 10-year yield traded at 6.25-6.50% and 10 year – 1 year spread <100bps, we expect JCI to be traded at 6,667- 7,097 or yielding 7.75-8.25%. Possible re-rating should materialize if rate cut signal intensify.
▪️Stocks we like are having undemanding valuation, margin improvement, low-moderate volatility. Stocks that meet this criteria : AUTO, BBNI, BSDE, GGRM, GOTO, SMGR.
MNCS Research
Disclaimer On
