Bulking up volume as the chip shortage has diminished
Key Takeaways :
▪️ We anticipate that the chip shortage has subsided and will begin recovering in FY24E, signalling positive prospects for the handset industry to boost volume growth. After experiencing negative returns for 14 consecutive months, world chip sales recorded a growth of +5.7% YoY in Nov-23.
▪️ ERAA outlined its focus on leveraging the brand portfolio at the affordable prices for handsets and accessories. Among existing brands, we see several handsets in the affordable tier (<IDR3mn) or with attractive value-to-performance, such as Tecno Spark 10C, Infinix HOT 30 Play, and Tecno Camon 20 Pro.
▪️ We project handset volume growth of +9.2% YoY in FY24E, mainly driven by higher supply coupled with store expansions (flat as FY23) to boost coverage areas, as well as improved productivity per store.
▪️ We recommend a BUY for ERAA IJ with a higher TP of IDR505, implying PE/PBV of 7.2x/0.9x in FY24E. We assess that the potential increase in volume will be the company's growth engine going forward, as the chip shortage diminishes.
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