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Coloring the Future

When discussing the paint industry in Indonesia, it's impossible not to mention Avian. You’re probably familiar with one of AVIA’s flagship products, the "No Drop" waterproof coating, known for its catchy jingle: "No Drop No Bocor Bocor"



Tracing AVIA’s journey to success, we find a range of innovative products that have propelled the company to the top of the paint and coating industry.


AVIA offers two main product categories: architectural solutions, which account for 83% of revenue, and merchandise at 17%.


Source: Sucor Research


AVIA also dominates the wood and metal product segment with a 40% market share. While they rank third in the wall paint segment with a 10-12% market share, this presents a significant growth opportunity.


Beyond their product excellence, AVIA is ready to take on a bigger stage. According to recent calculations, AVIA is poised to be included in the MSCI Indonesia Small Cap Index in the upcoming adjustment in November 2024.


Source: Sucor Research


With a free float market capitalization of IDR 6.2 tn as of June 6, 2024, AVIA surpasses ULTJ's IDR 4.1 tn. AVIA’s stock liquidity is also impressive, with an average daily trading volume of IDR 11 bn for 1 month and IDR 10 bn for 3 months, compared to ULTJ’s IDR 10 bn and IDR 6 bn.


Looking ahead, the industry is projected to grow faster, with national sales volume expected to increase by about 7.5% annually.


Despite this growth, Indonesia’s paint consumption per capita remains low at 6 liters, compared to Singapore, Malaysia, and Thailand. This represents a significant growth opportunity for AVIA.


Source: Sucor Research


AVIA is diving into the lucrative wall paint segment, launching new product lines over the past few years. This strategic move has led to a CAGR of 6.9% from 2018 to 2023, boosting revenue contribution to 24%.

 

Source: Sucor Research


To support this growth, AVIA continues to strengthen its distribution network. The company manages distribution through its subsidiary, PT Tirtakencana Tatawarna, with 170 distribution centers covering over 56,000 retail outlets nationwide.


With a fleet of 587 delivery trucks and 43 three-wheeled motorcycles, AVIA can make around 11,000 deliveries daily.


Source: Sucor Research


In terms of finances, AVIA boasts a strong net cash position of IDR 6.1 tn as of 1Q24. With free cash flow of around IDR 1 tn annually, AVIA can maintain high and sustainable dividend payments. This robust cash position also allows AVIA to explore future acquisitions and mergers.


With this success story, AVIA continues to carve out achievements, establishing itself as a giant in Indonesia's paint and coatings industry. As AVIA continues to expand and innovate, the future looks bright and full of golden opportunities.


Therefore, we recommend a BUY for AVIA with a target price of IDR 860.



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