Who doesn’t know Alfamart? This million-ummah retailer is owned by PT Sumber Alfaria Trijaya Tbk (stock code: AMRT), which is known as a big player in the world of minimarkets in Indonesia. But, although its sales have remained stable, the latest financial reports show that sharply rising operating costs are starting to bite into its profit margins. So, the question now: is AMRT still worth collecting for the medium and long term?
FY2024 Performance: Revenue OK, Net Profit Slumps
Amid weakening purchasing power challenges, AMRT scored revenue of IDR118.2 trillion throughout 2024, growing 10.5% YoY. Fourth-quarter sales were also solid at IDR30 trillion, up 11.5% year-on-year. But don’t clap your hands just yet—net profit actually plummeted 7.5% YoY, reaching only IDR3.1 trillion.
How come? One of the culprits is the exploding costs, especially from the opening of four new Distribution Centers (DC) throughout 2024—three of which are outside Java. Rental and utility costs soared, up 16.4% and 16.2% year-on-year, respectively, outpacing sales growth itself.
Squeezed Margins: A Danger Sign for the Short Term
AMRT’s gross margin fell slightly by 10bps to 21.5%, while operating margin fell more deeply by 70bps to 3.4%. The increase in operational costs such as rent, electricity, and salaries due to massive expansion is the main cause. Interestingly, despite the cost pressures, the salary component was still under control, rising only 9.9% YoY and still dominating 53% of total opex.
However, the pressure has not stopped there. Non-core items and other revenue/expenses also missed expectations, making profits even thinner. Management is expected to provide a more detailed explanation at the next investor meeting.
Quarter I-2025: Performance Still Mixed
Looking ahead to Q1-2025, AMRT is expected to still record healthy revenue growth, especially thanks to the moments of Ramadan and Eid which usually encourage public spending. But, the main story is actually on the operational scale of the new DC.
Yes, large expansions do hurt at the beginning, like a steep climb before reaching the top. But if efficiency from DC only starts to be felt by the end of 2025, the potential margin improvement could be a sweet surprise. Remember, AMRT went through a difficult period in 2015–2016 and still recorded double-digit growth. History shows that this company knows how to survive.
Projections 2025: Transition Year Before Harvest in 2026?
We expect FY25 revenue to rise 11.1% YoY, in line with store expansion and stable store sales growth (SSSG). For margin, there is expected to be a slight recovery to gross margin of 21.7%, in line with marketing efficiency and DC’s optimization focus.
However, operating margin will still weaken slightly, projected to fall to 3.3% due to pressure from a 6.5% minimum wage increase and not yet fully stable expansion costs. FY25 EPS is predicted to grow only +7.6% YoY, but be prepared for a surge in FY26, which is projected to jump +24.8% YoY as the scale of operations comes to fruition.
Valuation and Recommendation: BUY, But Be Careful
We still recommend BUY for AMRT stock, although our price target has been lowered to IDR2,600 (from the market price of IDR2,050 as of March 27, 2025), giving a potential return of around 26.8%. This valuation decline is based on a slowdown in EPS and consumption trends that have not fully recovered.
The valuation now uses a multiple of 26.8x P/E, equivalent to +0.5 SD from the 5-year average—down from the previous +1.0 SD. In addition, foreign ownership which reaches 46.3% makes this stock quite vulnerable to global capital outflows.
Key Risks:
- SSSG growth is lower than expected
- Poor purchasing power of the public
- Slow DC optimization process
- Indonesia’s economic slowdown
Conclusion: High Risk, But Long-Term Potential Remains Attractive
So, should you buy AMRT shares now? If you are a short-term investor who doesn’t like to go up and down, maybe this stock feels too “bumpy”. But for those of you who think long and hard to cope with shocks—AMRT can be like a seed being watered. It is true that it still needs fertilizer (aka cost investment), but it is not impossible that in the next few years it will grow into a strong tree with sweet fruits: recovered margins and soaring EPS.
Point? AMRT is not for those who want quick results. But for those who are patient, the long-term opportunities are still promising.
Reference: ((Source Alfaria Trijaya))
