BBRI
Contact our analyst achmadi
37% UPSIDE, BUY
26th September 2023
Price Rp 5200
Target price Rp 7100
Steady Net Interest Margin
In the first half of 2023, BBRI's net profit grew by 18.70% year on year, reaching IDR 29.41 trillion. This figure was lower than the annual growth in the previous quarter due to a sharp increase in interest expenses, which grew by 63.71% YoY in June 2023, resulting in only a small increase in Net Interest Income, which grew by only 1.43%. Despite this, the NIM ratio remained within the guidance range of 7.7% and 7.9%, at 7.85%. Additionally, BBRI's other operating income performed better than in Q1, which had decreased by -4.31%. BBRI's 1H23 other operating income grew by 20.43% YoY, driven by a remarkable 342.25% growth in Unrealized Gains on Changes in the Fair Value of Securities. Given these conditions, we project that BBRI will grow its net profit by 32.37% YoY, reaching IDR 67.73 trillion in FY23.
Strong Loan Growth
As of June 2023, BBRI grew its loan portfolio by 8.81% for consolidated figures and 8.54% for the bank-only. For the bank-only, Medium segment experienced the highest growth, which mostly came from the Trading, Hotel & Restaurant sector, which accounted for 37.7% of the total. Other loans grew too. Consumer, Micro, Small, and Corporate grew by 11.51%, 10.39%, 6.09%, and 1.82% respectively. Ultra Micro Ecosystem loans, also grew significantly by 11.4% YoY, with the highest growth from PNM which grew by 18.6% and followed by Pegadaian and BRI Micro which also grew by 14.0% and 10.39% respectively.
Vigorous CASA Expansion
As of June 2023, BBRI recorded a solid growth in CASA, which increased by 10.13% YoY, leading to a 39 bps YoY increase in the CASA ratio, reaching 65.49%. This growth was primarily driven by Current Accounts, which grew by 24.27% YoY. The digitalization efforts of the bank through merchant EDC and BRImo also contributed significantly to the growth. The number of merchant EDCs grew by 30.43% to 282,000 merchants in 1H23, with sales volume per merchant increasing by 18.31% YoY to IDR 363.2 million. As for BRImo, the penetration rate increased by 2.3% to 34.7%, generating IDR 1,232.5 billion of fee income, which is 70.20% higher than June 2022.
Decline in Loan Quality in the First Semester of 2023
As of 1H23, BBRI's NPL ratio increased by 22 bps YoY to 3.32% for the bank-only figure, while the consolidated increased by 31 bps YoY to 3.26%. For the bank-only segment, an amount of IDR 15.3 trillion has been downgraded from performing loans to Non-Performing Loans. The downgrade is mostly driven by MSME loans. From an economic sector perspective, the downgrade was primarily in the Trading, Restaurant, Hotel sector (48.8%) and the Agribusiness Sector (23.4%). We forecast that in December 2023, BBRI will maintain its NPL ratio within its guidance range (2.6%-2.8%) at 2.73% for the consolidated, while the bank-only will experience a small improvement from the 1H23 figure to reach 2.89%, although it will still be higher than last year.
Valuation: 37%, Upside, Buy
Based on our DDM valuation, we have a target price of IDR 7,100 within one year, implying a valuation of 3.59x PBV and indicating a potential upside of 37%. Therefore, we recommend a Buy rating.
In the first half of 2023, BBRI's net profit grew by 18.70% year on year, reaching IDR 29.41 trillion. This figure was lower than the annual growth in the previous quarter due to a sharp increase in interest expenses, which grew by 63.71% YoY in June 2023, resulting in only a small increase in Net Interest Income, which grew by only 1.43%. Despite this, the NIM ratio remained within the guidance range of 7.7% and 7.9%, at 7.85%. Additionally, BBRI's other operating income performed better than in Q1, which had decreased by -4.31%. BBRI's 1H23 other operating income grew by 20.43% YoY, driven by a remarkable 342.25% growth in Unrealized Gains on Changes in the Fair Value of Securities. Given these conditions, we project that BBRI will grow its net profit by 32.37% YoY, reaching IDR 67.73 trillion in FY23.
Strong Loan Growth
As of June 2023, BBRI grew its loan portfolio by 8.81% for consolidated figures and 8.54% for the bank-only. For the bank-only, Medium segment experienced the highest growth, which mostly came from the Trading, Hotel & Restaurant sector, which accounted for 37.7% of the total. Other loans grew too. Consumer, Micro, Small, and Corporate grew by 11.51%, 10.39%, 6.09%, and 1.82% respectively. Ultra Micro Ecosystem loans, also grew significantly by 11.4% YoY, with the highest growth from PNM which grew by 18.6% and followed by Pegadaian and BRI Micro which also grew by 14.0% and 10.39% respectively.
Vigorous CASA Expansion
As of June 2023, BBRI recorded a solid growth in CASA, which increased by 10.13% YoY, leading to a 39 bps YoY increase in the CASA ratio, reaching 65.49%. This growth was primarily driven by Current Accounts, which grew by 24.27% YoY. The digitalization efforts of the bank through merchant EDC and BRImo also contributed significantly to the growth. The number of merchant EDCs grew by 30.43% to 282,000 merchants in 1H23, with sales volume per merchant increasing by 18.31% YoY to IDR 363.2 million. As for BRImo, the penetration rate increased by 2.3% to 34.7%, generating IDR 1,232.5 billion of fee income, which is 70.20% higher than June 2022.
Decline in Loan Quality in the First Semester of 2023
As of 1H23, BBRI's NPL ratio increased by 22 bps YoY to 3.32% for the bank-only figure, while the consolidated increased by 31 bps YoY to 3.26%. For the bank-only segment, an amount of IDR 15.3 trillion has been downgraded from performing loans to Non-Performing Loans. The downgrade is mostly driven by MSME loans. From an economic sector perspective, the downgrade was primarily in the Trading, Restaurant, Hotel sector (48.8%) and the Agribusiness Sector (23.4%). We forecast that in December 2023, BBRI will maintain its NPL ratio within its guidance range (2.6%-2.8%) at 2.73% for the consolidated, while the bank-only will experience a small improvement from the 1H23 figure to reach 2.89%, although it will still be higher than last year.
Valuation: 37%, Upside, Buy
Based on our DDM valuation, we have a target price of IDR 7,100 within one year, implying a valuation of 3.59x PBV and indicating a potential upside of 37%. Therefore, we recommend a Buy rating.
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