Solid Quarter

SMSM has reported an increase of 1.3% (yoy) in revenues to Rp3,817.7 billion in 9M24 vs. Rp3,763.5 billion in 9M23, thanks to the Company’s strong performance in Q3/24. In Q3/24 alone, revenues have jumped by 23.0% (qoq) to Rp1,467.7 billion vs. Rp1,283.0 billion in Q3/23 as well as higher than the revenues worth Rp1,193.5 billion recorded in Q2/24. At the bottom line, SMSM’s core net profit was also up by 3.8% (yoy) to Rp722.1 billion in 9M24 vs. Rp694.8 billion in 9M23. Separately, core net profit in Q3/24 was up to Rp274.1 billion or up by 2.8% (yoy) from Rp265.5 billion in Q3/23 and up by 17.7% (qoq) from Rp233.0 billion in Q2/24. The Company had revised its guidance from 8% (yoy) to 2% (yoy) last August, and based on the updated financial data, we expect revenues to just grow by 2.1% (yoy) to Rp5,207 billion – in line with the Company’s latest guidance. See the notes section on the next page for more detailed explanation on this.

Margins have Generally Improved

Margin-wise, SMSM also generally improved – except on core net profit margin (cNPM). Gross profit margin (GPM) for instance, has increased to 35.6% in 9M24 vs. 34.3% in 9M23; while in Q3/24 it was higher at 36.4% vs. 34.3% and 34.9% in Q3/23 and Q2/24, respectively. Similarly, core operating profit margin (cOPM) has improved as well to 26.1% in 9M24, up from 25.2% in 9M23. cOPM was also higher at 27.9% in Q3/24 vs. 25.9% in Q3/23 and vs. 24.9% in Q2/24. Conversely, the Company’s core net profit margin (cNPM) has slipped to 18.7% in Q3/24 from 20.7% in Q3/23 as well as from 19.5% in Q2/24. Cumulatively however, cNPM was still up at 18.9% in 9M24 vs. 18.5% in 9M23. 

Risks on the Table

The key risks being faced by the Company so far this year, and in the coming quarters, include the ailing domestic automotive industry. So far, data from Gaikindo has shown that automotive sales have dropped by 15% (yoy) in 10M24 vs. 10M23 at the wholesale level. At the retail level, however, automotive sales have dropped by 11.5% (yoy) in 10M24 from 10M23. As SMSM’s products are heavily used in the automotive industry, the industry’s less than favorable performance this year has weighed on SMSM’s performance as well. Another risk on the table is the geopolitical outlook. Given a significant portion of SMSM’s revenues comes from overseas, geopolitical stability is supportive to the Company’s performance. Nevertheless, Russia-Ukraine and Middle East conflicts have been negatively affecting revenues from overseas. 

Target Price Lowered

Based on the three price multiples that we are using to value SMSM, the target price has been slightly revised down to Rp2,079 per share vs. Rp2,128 per share in our previous report. The new target price implies 13.0% upside potential from the reference price of Rp1,840 per share (15 November 2024) and implies 12.3x PER (TTM), 2.3x P2R (TTM) and 3.5x PBV (MRQ). See the notes section for more detailed explanation.