Over the past two days, BBRI has seen a notable decline, triggered by China's central bank stimulus announcement on Tuesday, which shook global markets, including Indonesia.
You can refer to our previous sales notes for a more in-depth analysis.
However, despite this pressure, we view this as a buying opportunity.
Why?
Because BBRI’s fundamentals remain solid.
This is clearly reflected in their 8M24 performance, which shows positive trends across key metrics—credit growth, asset quality, and profitability improvement.
BBRI has delivered solid financial results, with net profit growing by 4% yoy.
In August, BBRI’s net profit soared to IDR 4.8 tn, marking a 21% yoy increase and an impressive 51% mom jump.
This surge was driven by a significant drop in provisions, which fell by 21% yoy and 32% mom, along with a major boost from non-interest income, particularly from fees and recovery income.
PPOP growth of 16% yoy is another highlight, powered by a remarkable 37% yoy rise in NoII.
A key driver behind this success is the reduction in credit costs, down to 3.2% in 8M24 from a peak of 4.4% in February 2024.
While credit costs remain slightly higher than the provided guidance, the recent decline signals improving credit quality at BBRI, particularly in the micro and small loan segments.
With a strong LLR of 6.6%, BBRI is well-positioned to manage credit risk amid economic fluctuations.
However, one challenge to watch is the slowdown in loan growth, which hit 7.1% yoy in 8M24, down from 8.6% in 7M24.
The slowdown in loan growth reflects BBRI’s cautious approach toward its core SME segment.
However, management has strategically shifted towards higher-quality corporate loans to maintain asset quality and manage credit risk.
Deposit growth also eased to 6.6% yoy in 8M24, as part of the strategy to reduce interest costs and preserve healthy liquidity.
Despite some challenges, BBRI is projected to maintain stable performance through 2024, with net profit expected to reach IDR 57.9 tn by year-end, a slight 3.7% yoy dip.
This anticipated decline is driven by rising credit costs and narrowing NIM
Looking ahead, BBRI’s profit is expected to bounce back, with credit costs projected to drop by 20 bps to 2.8% in 2025.
Loan growth is also set to improve, with a conservative 10% yoy increase forecasted for 2024 and 12% yoy for 2025, as credit quality continues to strengthen.
We are confident that BBRI’s strategic initiatives, backed by government policies aimed at boosting the purchasing power of the lower-middle class, will further solidify its financial fundamentals.
With this confidence, we maintain our BUY recommendation, setting a target price of IDR 6,000.
Now is the time to capitalize on this volatility and consider BBRI as a compelling investment opportunity!
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