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1H22: Set a New 15.41% NPM Records Since Pandemic. Ride again?
• RALS IJ booked a revenue of IDR1,255.56bn in 2Q22 (+109.07% QoQ/+2.41% YoY), translating the 1H22’s revenue to be IDR1,856.09bn (+8.11% YoY), which implies 56.33%/45.71% of ours and cons.
• We believe the rise in 1H22 revenue was on the back of Eid festive coupled with ever-increasing mobility given the post-pandemic era also CCI optimistic.
• Net profit recorded at IDR256.03bn in 2Q22 (+753.22% QoQ/+14.56% YoY), bringing its 1H22 net profit to soared of IDR286.03bn (+107.53% YoY), reflecting 137.25%/84.46% of ours and cons.
• The rise of net income was due to lower COGS (-1.54% YoY) and OPEX (-6.61% YoY) making its GPM and OPM expands to 49.44%/16.73%, respectively. Moreover, RALS managed to set a new 15.41% NPM records since pandemic levels.
Post-Pandemic Recovery, While....
• We believe that the store expansion could be a turnaround story for RALS in FY22E.
• The management has planned to add 2 more stores and reopen ~8 stores of Ramayana that were temporarily closed given the pandemic. Hence, this could potentially increase its total stores to 108 in FY23F (vs 99 in FY21).
• Furthermore, we believe that many retailers have not fully recover of their offline businesses, thus becoming a "blessing in disguise" for RALS in accelerating its top-brand market share. In FY22E, top-brand market shares remains solid at 14.60% vs 12.70% in FY19 (exhibit 03).
• RALS is also seeking to strengthen its omnichannel through CRM program called Ramayana Member Card that including digital apps. This shows that the company will compete and make their best effort to boost its performances ahead.
...Inflation Still a Possible Threat
• However, we concern regarding the inflation hike which potentially affect the purchasing power of mid-low segments by prioritizing basic needs such as foodstuff.
• Jul-22 inflation stood at +4,94% YoY or +3,85% CoC, while clothing sub at +1,48% YoY. The inflation of FnB and Tobacco group remains the biggest contributed of headline inflation was +0,31% MoM.
• Historically, revenue stumbled as inflation bites in FY14-FY15 (exhibit 04).
• Looking ahead, the headline inflation will be driven by the higher staple food prices on the back of supply shortages given the bad weather. We estimate that the inflation pace in FY22E stood at +4.44% YoY, sluggish but stay elevated.
• We revised our top-bottom line figures in FY22E regarding inflation risk in the midst of store expansion to be +26.25% YoY/+19.45% YoY.
Valuation and Recommendation: BUY with a Target Price IDR660
We transfer our coverage on RALS IJ from Rifqi Ramadhan to Raka Junico. We recommend BUY with target price of IDR660/share, implying a PE/PBV of 22.99x/1.27x in FY22E. We expect the rise of new outlets to boost RALS’s revenue ahead, we also believe its market share to still be quite solid for the mid-low segment and expect the festive season at the end of the year to become a bigger revenue driver, supported by: 1) optimistic CCI; 2) retail sales remains solid, especially clothing along with ever-increasing mobility; 3) the concept upgrade of outlets to a lifestyle-mall. Key downside risk: 1) inflation hikes above expectation; 2) ineffective outlet expansion; 3) lower than estimate purchasing power.
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