2Q26F and 3Q26F previews: new launches of handsets cause up-trading. On the back of the high base effect in 2Q25 which captured the deferred iPhone 16 launch from FY24, 2Q26F results are expected to be flattish YoY. However, for 3Q26F, we expect sales to increase +4.8% YoY and net profit +53.0% YoY cause by uptrading in handset sales, as most brands have introduced more high-end models to pass on escalating global chipset prices (figure 2). Notably, ERAA's SSSG continued its positive trend in 5M26 at +7.2%, supported by top-of-the-line products such as the iPhone. ERAA also noted that demand for high-end flagship products such as the iPhone 17 Pro Max remains strong. To cushion IDR depreciation impact, ERAA has implemented front-loaded inventory buffers and provided promotional support for volumes. Meanwhile, ERAL, its active and lifestyle subsidiary, has continued to record double-digit SSSG of +10.8% on positive performances across the board (e.g. active lifestyle products).

Phone sales volumes: adversely impacted by memory-led ASP inflation. Globally, IDC projects 2026F shipments to contract 13.9%, the steepest decline on record, with blended ASP rising c. USD100 to a record USD550. Worth noting, in 1H26 most new product launches from brand principals recorded uptrading, with headline prices +4-27% higher; the entry-tier (priced under IDR 3mn) to mid-tier (priced IDR 3-8mn) phones saw the biggest price hikes of +17-27% vs previous model launches. For Indonesia, 1Q26 smartphone shipments fell 9% YoY as the global memory supply crisis drove retail price hikes of 7-45% across both older models and new launches. In 2Q26, compounded by IDR depreciation to c.IDR 18,000/USD (-11% YoY), mobile DRAM contract prices rose further by c.70-83% QoQ. This hit the purchasing-power-sensitive entry tier hardest (sub-USD150: -19% YoY), while the premium segment (>USD600) jumped +30% YoY and reached its highest total-shipment level of 8.3%, primarily driven by Apple phones.

Most attractive valuation in the sector — BUY with reduced TP to IDR 500. While we maintain our Buy rating on ERAA, we have cut our TP to IDR 500 on overall lower market and sector valuations. At this stage of the cycle, although ERAA has outperformed the JCI by 17.6% YTD, the stock is still currently trading on 2026F P/S of 0.1x, the lowest in the sector and at 83% discount to peers. In terms of 26F P/E, ERAA is also the cheapest trading at 71% discount to the sector (figure 7). We like the company’s dominant market share cushioning the impact of difficult operating conditions and its strategy to increase contribution of its active and lifestyle business to c.25-30% of total revenues over the longer run to boost ROE. Key risks: 1) weaker SSSG, 2) worse IDR depreciation, and 3) geopolitics and supply constraints disrupt product imports.