Matahari Putra Prima Healthy Operations Despite a Weak Economy

Due to the weak economy and seasonal factors, Matahari Putra’s 6M15 sales fell below our/consensus forecasts. Thus, we cut our DCF-based TP to IDR4,100 (from IDR4,650, 41% upside) on lower SSSG and its store expansion plan. However, we maintain BUY, as it remains the healthiest, largest hypermarket chain operator in Indonesia. Its robust operations lifted 6M15 gross/operating margins by 70bps/30bps YoY.

6M15 sales below our/consensus FY15 forecasts on seasonality
Matahari Putra Prima’s (Matahari Putra) 6M15 sales of IDR6.85trn were at 41.8%/42.3% of our/consensus full-year sales estimates respectively. Note that the two weeks of Lebaran sales in July were not included in its 6M15 results. We also estimate that Matahari’s sales dipped by c.5% YoY over the Lebaran period due to the weak Indonesian economy.

Strong operations and good cost controls led to margins expansion
Matahari’s gross and operating margins expanded by 70bps and 30bps YoY respectively in 6M15. As such, it managed to deliver a solid 26.4% YoY growth in core profit in 6M15, in the midst of a weak macroeconomic environment while the company’s competitors recorded declining margins.

Lower same-stores sales growth (SSSG) and slower-than-expected expansion of new Hypermart stores
Although the company’s SSSG rose by 2.6% in 2Q15 (vs 1.8% in 1Q15), we trim our FY15F SSSG to 1.8% from 5.0%. Unlike Matahari Department Store (LPPF IJ, BUY, TP: IDR18,900), which managed to open eight new stores in 6M15, Matahari Putra opened only four new Hypermart stores in 6M15. Accordingly, we lower our new Hypermart new store assumption to eight stores (from 12 previously) for 2015.

Still a BUY, albeit with a lower TP
We maintain our BUY call on Matahari Putra with a lower TP of IDR4,100 (from IDR4,650). Our DCF-based TP is derived using a WACC of 11.0% and TG of 5.0%, implying 38.7x/35.3x FY15F/FY16F P/Es.

Due to seasonal factors, 6M15 sales were below our and consensus FY15 forecasts. Matahari Putra’s 6M15 sales of IDR6.85trn comprised 41.8% and 42.3% of our and consensus sales estimates respectively. Including the two weeks of sales during the Lebaran festivities in July, which were not included in the 6M15 results, we estimate that Matahari Putra achieved c.5% YoY lower sales this year during Lebaran due to the weak Indonesian economy.

Lower SSSG and slower-than-expected expansion of new Hypermart stores
While Matahari Putra’s SSSG rose by 2.6% in 2Q15 (vs 1.8% in 1Q15), we lower our FY15F SSSG to 1.8% from 5.0%. Unlike Matahari Department Store which managed to open eight new stores in 6M15, the company opened only four new Hypermart stores in 6M15. As such, we lower our new Hypermart stores assumption to eight (from 12 previously).

Revising our forecasts
We cut our FY15F/FY16F earnings to IDR580bn/IDR641bn (-13.9%/-14.2%) respectively to reflect the lower SSSG and new Hypermart store openings assumptions as explained above.