Handset Volume On-track; High Leverage Diminishing Earnings Projection
Key Takeaways :
▪️ ERAA reported handset sales volume of 5.8 mn units in 1H24, which is in-line with our estimates with a run-rate of 52%. In early 3Q24, Transsion Holdings released its affordable handsets such as the Infinix Note 40S 8/256 GB (IDR3,099k) and Tecno Pova 6 8/256 GB (IDR2,499k).
▪️ Our finding on Ditjen SDPPI's certification website revealed predicted handset line-ups for the end of 3Q24 (or 4Q24), including the Xiaomi 14T, Xiaomi 14T Pro, Realme Note 60, Realme 13 Pro+5G, and Realme C61. We expect a wider range of handset prices to cater to diverse consumer segments and is likely to bolster ERAA’s handset volume growth ahead.
▪️ ERAA utilized a debt facility with a duration of 13 months, pushing its long-term debt to IDR3.0 tn (vs IDR1.6 tn in 1Q24). This translates to a net gearing of 1.0x, and DER of 1.2x. We are lowering our net profit projection in FY24E by -14.6% to IDR951.6 bn, but still representing YoY growth of +15.2%.
▪️ We reiterate our call for ERAA with a BUY at a lower TP of IDR470/share. The anticipated influx of handset models across various price points should sustain volume growth and drive revenue. Downside risks include: 1) muted sales volume; 2) supply chain disruption; 3) lower-than-anticipated net profit.
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