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26 April 2022

ZYRX IJ - MNC Sekuritas Equity Report April 26, 2022

Promoting Affordable and Durable Local Brand

 

Insight from the Visit
PT Zyrexindo Mandiri Buana Tbk (ZYRX) hosted an analyst meeting on Apr 1, 2022 at Jl. Daan Mogot and displayed two notable projects: collaboration with Pegatron and government education program. ZYRX will continue to focus on developing its laptop sales to compete with other global brands and potential acquisition of software company. With this upcoming projects, ZYRX is optimistic that it can capitalize on the uptick in demand, while selectively picking project owners to raise its revenue.

ZYRX Local Hardware Solution Company with more than 25 Years Experience
• ZYRX at a glance: PT Zyrexindo Mandiri Buana Tbk (ZYRX IJ) was established on May 14, 1996, and has more than 25 years of experience in assembling and selling computer equipment. ZYRX is a local brand currently known for offering affordable IT products (laptops, computer hardware) with the lowest price <IDR5 mn/unit compared to its global peers. Currently, ZYRX has 24 product SKUs for IT products and mobile devices supported by a production capacity of up to 430,000 units/year. In addition, ZYRX's vision and mission to narrow the technology gap with technology affordability for Indonesian people.
• Business strategy: In line with the era of technology, ZYRX seizes opportunities in the midst of the intense competition from foreign products. To achieve it, ZYRX has prepared several strategies, including: 1) #SiswaTOP, which focuses on distributing laptops for students with a target of 50 mn students in Indonesia; 2) #WarungPOS, a portable point of sales device intended for MSME businesses targeted to be absorbed by up to 3.5 mn MSMEs in Indonesia; 3) #ZmartWear, a device for sports and Health activities; 4) #ZmartART, a device for replacing the role of a household assistant; 5) #ZmartHome, a device for home use; 6) #ZmartOffice, a device for managing offices such as lights, alarms, and security; 7) #ZmartFac, a device for accommodating factory needs and acting as connections between machines, logistics and product tracking. Overall, #SiswaTOP is the biggest contributor to sales of ZYRX laptops, up to 90% from B2G to support the Ministry of Education, Culture, Research, and Technology's program. Furthermore, the government allocated IDR17 tn to purchase ICT products in FY21-FY24F.
• ZYRX distribution: ZYRX recorded sales volume of 202,000 product units in FY21 (vs 140,500 in FY20), with an average ASP of IDR3.23 mn/unit. ZYRX distributes its products through distributors and marketplaces, as well as direct sales to government/corporate customers. Currently, government and corporate customers account for 85% of total sales. ZYRX aims to have its sales details evenly distributed among government and retail customers and targets its laptop and mobile device sales to reach 250,000 units, or IDR800 bn in FY22E.

Indonesia technology landscape
• PC Market Trend: Indonesia's PC market (desktops, notebooks, workstations) has grown significantly by 50% YoY, with a total of 2.06 mn units shipped into the country in 1H21. In addition, from these three PC market categories, notebooks continued to be the driving category for both the consumer and commercial segments, taking up 85% share of the total PC shipments with an impressive growth of 78% YoY in 1H21.
• Technology industry during Covid-19: With the occurring virus outbreak, hybrid working arrangements were continued to be implemented by companies in Indonesia, which led to strong demand for mobile devices in the private sector. Meanwhile, in the public sector, the bulk of the demand was driven by the Chromebook devices used for the education tender following the government’s decision to shift its purchases toward Chrome OS devices.
• Chip Shortage: Before the pandemic the cost of overseas shipping was < 2,000 USD, while in 2021, the cost rose to 9,000 USD, thus increasing the price of the goods. Furthermore, the exponential rise of the logistics also influenced the rising price of the product. Thus, it is still a risk that must be considered for the IT industry.

Valuation and Recommendation: Not Rated
We see that ZYRX could possibly improve their financial performance in FY22E. This has been made possible through the #SiswaTop program, supported by an increase in ZYRX's market share to 4% in FY21 (vs 1% in FY20).

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