Dampened performance

In FY24, RALS’ revenues have managed to eke out a small increase to Rp2,760.5 billion or 0.6% (yoy) higher than Rp2,744.4 billion generated in FY23. Outright sales were relatively unchanged at Rp2,058.2 billion, while revenues from commission on consignment sales have inched by 2.5% (yoy) higher to Rp702.3 billion in FY24. At the bottom line, RALS’ net profit has increased by 4.6% (yoy) to Rp314.1 billion in FY24 vs. Rp300.4 billion in FY23, implying net profit margin (NPM) of 11.4%, which was higher than 10.9% recorded in FY23. Quarterly data shows that both revenues and net profit were up by 7% (yoy) and 34.3% (yoy), respectively to Rp646.7 billion and Rp247.9 billion, respectively in Q4/24 vs. Q4/23. Similarly, NPM was also up in Q4/24 at 9.5% from 7.6% seen in Q4/23. 

Struggling segments

Segment-wise, RALS’ revenues from fashion & accessories (F&A) were mixed in FY24, with net outright sales slipped by 1.8% (yoy) but commission on consignment sales increased by 2.4% (yoy). Consequently, gross profit from the Company’s main segment was up by just 0.4% (yoy) in FY24, while its gross profit margin (GPM) managed to inch higher from 61.1% in FY23 to 61.7% in FY24.  In terms of core operating profit, the F&A segment saw a 7.0% (yoy) increase, while the segment’s Core Operating Profit Margin (cOPM) however, has improved from 8.9% in FY23 to 9.5% in FY24. On quarter-to-quarter basis, the F&A segment’s performance was more encouraging. While net outright sales grew by just 0.6% (yoy) in Q4/24 vs. Q4/23, gross profit was notably higher by 11.0% (yoy). Furthermore, the segment’s core operating loss has worsened further to Rp23.5 billion in Q4/24, albeit the loss has narrowed compared to Q4/23.  The groceries segment has also incurred gross losses of 4.8% (yoy) in FY24 on the back of falling net outright sales by 5.4% (yoy) even as at the same time the segment’s commission on consignment sales has managed to grow by 6.4% (yoy). Furthermore, the segment’s core operating profit has dropped 11.3% (yoy), but the cOPM has slightly improved from -14.4% in Q4/23 to -10.7% in Q4/24. 

Anticipating weaker performance

Continuing its historical pattern, RALS’ revenues in Q4/24 have indeed exceeded the revenues seen in Q3/24. For Q1/25, we expect the revenues will be better than Q4/24, if not relatively unchanged due to Eid-al-Fitr. Still, based on the management’s recent statement, Q1/25 was described as “flattish”, which implies similar level with the one seen in Q1/24 – Rp829 billion. While in FY24, the Eid-al-Fitr was celebrated in early April, in FY25 it was celebrated in the borderline of March and April. Thus, we expect bigger portion on the Q1/25 instead of Q2/25. If it was flattish indeed, then it should be a concerning issue because it should be better given the seasonality factor. Unlike last year, Q2/25 is likely to be lower on the back of lack of festive factor, and thus we should anticipate for weaker Q2/25 relative to Q2/24 as well as Q1/25. Overall, the “flattish” Q1/25 suggests that this year’s revenues is at risk of being weaker than in FY24. This is the basis for our assumptions which are used to forecast RALS’ performance in FY25, thereby influencing its valuation.

Target price lowered

We maintain our three price multiples for valuation: Price-to Earnings Ratio (PER), Price-to-Book Value Ratio (PBV), and Price-to-Revenues Ratio (PRR). As we have just finished FY24, we are using forward-looking price multiples for valuation to find the target multiples. On PER, PBV and PRR, we have the target prices of Rp373, Rp435, and Rp393 per share, respectively. Averaged based on equal weighting, we get Rp400 per share as the blended target price, which implies 7.8x PER25F, 0.7x PBV25F, and 0.9x PRR25F. Compared to its current price of Rp344 per share, the target price represents 16.1% upside potential. Key risks being faced by RALS remain: the competition against its rivals – particularly the online-based competitors, deteriorating consumers’ purchasing power – especially due to inflation of essential goods.