Revealing the Potential Behind Growing Sports Enthusiasm
Key Takeaways :
▪️We noted that domestic smartphone shipment volumes shrank by -12.4% YoY in 1Q23, while ERAA’s sales volume declined only -4.8% YoY, on the back of repressed demand from lingering chip shortage. Yet, according to IDC, Samsung’s shipment volume witnessed a growth of +5.6% YoY, reflecting that purchasing power in mid-high consumers remained resilient.
▪️We see that OnePlus (flagship killer) will reenter the domestic market. Moreover, Itel successfully attracted consumer attention at a price of <IDR1.5mn with competitive specs. However, we have no further information of those brands' availability at Erafone, yet it's a promising opportunity for ERAA to capitalize on these brands as volume drivers in the future.
▪️We noticed that post-pandemic relaxations have given rise to new healthy habits, including sports trends (running, workouts, etc), which have positively benefited ERAA through its active lifestyle segment.
▪️Interestingly, ERAA’s stock yielded +22.5% YTD, with foreign ownership of the total free float having risen to 32.9% in Jun-23 (vs 26.2% in Jun-22). We see that despite potential margin contractions given its expansion, now markets tend to appreciate ERAA’s ongoing business diversification efforts with optimistic future prospects.
▪️We recommend BUY for ERAA IJ at a TP of IDR690, implying PE/PBV of 10.4x/1.5x in FY23E. Downside risks include: 1) lower ASP; 2) higher-than-expected OPEX; 3) below-than-anticipated sales volume.
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