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Indonesia on Wheels

Indonesia's automotive sector is shifting into high gear…

As Southeast Asia's largest economy, Indonesia is witnessing a remarkable surge in its automotive industry.

This tremendous potential isn't just good news for car manufacturers; it's also a boon for the multifinance sector.

Between 70% and 80% of Indonesians prefer financing options over paying cash when purchasing vehicles.

In 7M23, national two-wheeler sales soared, recording a 43% yoy increase to 3.68 mn units, a significant portion of the 5.8 mn-unit target set by the Association of Indonesian Automotive Industries (AISI).

On the four-wheeler front, retail sales also witnessed a 6.5% yoy growth, reaching 586,401 units, which accounts for 56% of Gaikindo's 1.05 mn-unit target.

From the start, Adira Finance (ADMF), has pursued an unwavering aspiration to stand as the premier financing company in Indonesia.

Catering to an array of financing needs, ADMF’s comprehensive portfolio spans multipurpose financing, household appliances and electronics, automotive solutions (including motorcycles and cars), all the way to facilitating Umrah financing within the framework of Sharia principles.

Within the realm of financing portfolios, the 4W category takes the lead, accounting for a significant 53% in total (comprising 36% new and 17% used).

In contrast, the 2W category contributes 32% (comprising 28% new and 5% used).

The remaining 14% is allocated to diverse non-automotive segments, encompassing financing for durable goods, MPL (Multipurpose Loans), and heavy equipment.

Source: Company

MPL have emerged as a potent growth driver for ADMF, boasting a remarkable 41% CAGR over the past five years.

Foreseeing further potential, ADMF aims to increase MPL's contribution to 25% within the next 2-3 years.

The heightened MPL contribution is expected to bolster ADMF's net interest margin (NIM), courtesy of its characteristic of yielding higher loan returns.

Over the long term, we forecast NIM to soar to 25.4% in the next decade, surpassing the 23.3% average of the previous five years.

With the recent surge in automotive sales, ADMR is poised to have a direct, favorable impact.

We anticipate ADMF’s financing to experience robust growth, projected at 18% and 15% yoy from 2023-24F.

Through consistently delivering one of the most robust ROE in the industry at an impressive 18.5% in 1H23 (in contrast to industry average of 15.8%), we envision further opportunities for ROE enhancement in the years ahead.

We initiate BUY with GGM-based TP of IDR16,250, implying 1.3x forward PB 2024F.

It's full speed ahead for Indonesia's automotive industry!

Find our full initiation report here:

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