Dare to Sparkle!
9M18 Results: Stronger Top-Line, in line with MNCS Estimate
HRTA displayed satisfactory performance in 9M18, with a 15.26% YoY increase in revenue from IDR1.86 tn in 9M17 to IDR2.14 tn in 9M18. This is in line with our expectations, representing 74.83% of MNCS’ FY18E estimates. Increased sales was supported by the Wholesale Division and Store Division, which recorded growth by with 10.01%/72.53%YoY respectively, contributing 87.52%/12.42% to total sales. We believe that an increased number of stores supports higher revenue. The franchise run by HRTA also showing a good result at the end of 9M18 contributing IDR1,35 bn (vs IDR235 mn in 9M17). HRTA also successfully maintained its operational performance, holding their gross margin at 9.39% (vs 9.12% in 9M17). Meanwhile, net income showed an increase of 7.62% YoY to IDR101.94 bn in 9M18 (vs IDR94.73 bn in 9M17) with net profit margin at a level of 4.76%, which reflects 77.45% of MNCS FY18E estimate.
Enriched its Product Portfolio
In 9M18, HRTA launched an elegant and glamorous jewelry designs combining gold and stones to add to the 9M18 signature collection. HRTA also introduced their Brand Ambassador, Rossa, the most popular singer in Indonesia and Southeast Asia to build their brand to the market. We believe that healthy financial performance will endure throughout the year, supported by the opening of new outlets and the launch of new products, will be able boost revenue growth through FY18E/FY19F, reaching IDR2.86 tn/IDR3.36 tn. As of November 2018, HRTA already opened 33 retail outlets, spread across Batam, Jambi, Jakarta, Semarang, Surabaya, Bali and Makassar.
Recommendation: Maintain BUY with a Target Price of IDR430
We reiterate our BUY call for HRTA with lower TP: IDR430 (from IDR460) which implies an PE/PBV of 13.31x/1.59x in FY18E and 10.83x/1.43x in FY19F. We believe that the massive expansion and adoption of business strategies resulting in better margins will maintain the Company’s growth. Meanwhile, risks that could potentially hamper performance growth includes: 1) Company expansion strategies not running as expectations; 2) Highly intensive working capital; 3) Gold price fluctuations; 4) Foreign exchange risk.
