Matahari Putra Prima In Robust Shape

Despite weak consumer consumption in 1Q15, Matahari performed well and managed to increase both its gross and EBIT margins YoY by 90 bps and 50 bps respectively. Thus, we reiterate BUY, with a DCF-based TP of IDR4,650 (17% upside). The 1Q15 numbers, consistent with its historical performance, were in line with our and consensus estimates. The company has net cash and little exposure to the USD.

1Q15 results in line
During FY12-14, Matahari Putra Prima’s (Matahari) 1Q sales accounted for c.22.4% of its full-year sales while its 1Q net income made up c.11.5% of full-year net income. In 1Q15, the company’s sales were at 20.4%/20.3% of our/consensus estimates, while its net income accounted for 12.3%/13.6% of our/consensus projections respectively. As such, Matahari’s 1Q15 results were in line with expectations despite the weak consumer consumption in Indonesia during the quarter.

Margin expansion
Matahari expanded its gross margin by 90bps YoY from larger economies of scale, by focusing on its most profitable 200 store-keeping units (SKUs) and better-managed promotions. It also managed to widen its EBIT margin by 50bps YoY as it managed its rental cost efficiently while expanding.

Expansion plan and same-store sales growth (SSSG)
The company’s relatively low SSSG of 1.8% was affected by its decision to remodel selected stores to its G7-format, which is more efficient in bringing traffic to the stores. YTD (April), MPPA has opened three stores and is on track to open 12 hypermarkets this year.

Net cash and minimal exposure to USD
Matahari is in a net cash position and has minimal exposure to the USD.
Maintaining our BUY recommendation. We continue to like the stock and maintain our BUY call with a TP of IDR4,650. Our DCF-based TP is derived using a WACC of 11% and TG of 5%, implying a 37.8x FY15 P/E.