JSMR Sep2023

JSMR

Contact our analyst Eka

25% potential Upside, BUY
5th September 2023
Price Rp 4370
Target price Rp5460

Anticipating Strong growth in toll road revenue

JSMR is projected to experience a 10% increase in toll road revenue during 2023F. This growth is attributed to tariff adjustments in the first half of 2023 and anticipated adjustments for eight additional toll roads in the second half.
The introduction of two new toll roads, namely Jakarta – Cikampek South Toll Road Section 3 and Cinere - Serpong Toll Road Section 2, is expected to enhance connectivity and further bolster revenue growth.
As of the first half of 2023, JSMR's consolidated toll and operating revenue reached IDR 6.98 trillion, reflecting a year-on-year (YoY) growth of +4.9%. In the second quarter of 2023 (2Q2023), revenue growth continued with a YoY increase of +3.9% or +6.0% quarter-on-quarter (QoQ), reaching IDR 3.59 trillion.
Traffic volume has also exhibited robust growth for JSMR. Toll transaction volume surged by +6.6% YoY in 1H2023, propelled by the Eid festival and holidays. Subsidiary toll road transaction volumes rose by +15.5% YoY, while parent-level transaction volumes grew by +5.2% YoY.
In terms of capital expenditure (capex), JSMR has allocated IDR 8 trillion – 10 trillion for 2023. For 1H2023, capex expenditure stood at IDR 2.5 trillion.
Additionally, a planned share buyback for toll roads such as Semarang – Batang, Solo – Ngawi, and Ngawi – Kertosono in 3Q2023 is expected to contribute to JSMR’s EBITDA growth. The company aims for EBITDA growth of over 10% this year.
Based on the sustained volume increase and tariff adjustments, our target for JSMR's toll and operating revenues is IDR 14.8 trillion.

Strong Profitability in 2Q2023

During 2Q2023, JSMR achieved a higher bottom line profit margin, attributed to a -19% YoY decrease in tax expenses and a -29.7% YoY reduction in finance costs.
Net profit for 2Q2023 grew impressively by +90% YoY or +31% QoQ, totaling IDR 651 billion. This translated to a higher net profit margin (NPM) of 18.1%.
However, the company's operating income experienced a -13.2% QoQ decline or -0.7% YoY decrease to IDR 1.37 trillion in 2Q2023.
This was due to the early payment of Jabodetabek’s land tax in 1H2023, amounting to IDR 501.6 billion, marking a +35.5% YoY increase. Consequently, the operating profit margin (OPM) for 2Q2023 slightly decreased to +38.3%. In 1H2023, operating income showed a marginal YoY increase of +1% to IDR 2.96 trillion.
With the early land tax payment and reduced finance costs, improved operational efficiency is anticipated in JSMR's operating expenses for 2H2023.

Valuation: TP 5,460, Maintain BUY

Our target share price for JSMR stands at IDR 5,460, resulting in a projected 2024F price-to-earnings (PE) ratio of 15x. This offers investors a potential return of 25%. Considering these factors, we maintain our recommendation to BUY JSMR shares.

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