2Q25 Earnings Review: Weak Quarter

2Q25 results: Core NP: -5.9% YoY; 45% in-line, 40% below, 15% above. The majority of companies under our coverage have released their 2Q25 results, which were generally weak, with weighted aggregate core net profit down -5.9% YoY and -2.0% QoQ. Of the 40 companies that reported, 45.0% met expectations, 40.0% missed estimates, and 15.0% exceeded expectations. In terms of sectors:

▪ Banks posted combined -3.4% YoY and -3.8% QoQ decline in net profit, as rising provisions, particularly at BBRI and BBNI, offset resilient NIMs at BBCA and BBRI. Consumer NPLs rose, especially in auto-related loans, though CASA growth and stable funding costs provided some support.

▪ In consumer, margin pressure from higher input costs and weak discretionary spending led to muted core profit (-1.7% YoY), prompting earnings downgrades.

▪ For telco, ISAT and TLKM faced continued topline pressure from declining ARPU and weak B2C demand, which are likely to persist in 2H25. Meanwhile, tower companies delivered stable results, supported by net tenancy additions and high EBITDA margins, with MTEL favored for upside on its M&A potential.

▪ Poultry players CPIN and JPFA were hit by falling broiler and DOC prices; however, we expect 2H25F earnings to recover on the back of culling programs and improved ASPs.

▪ Within metals, gold outperformed on record ASPs and strong demand, driving ANTM’s earnings, while nickel saw mixed results, with NCKL outperforming on margin gains and associate contributions.

▪ Coal remained the weakest, dragged down by lower ASPs and rising costs, though new royalty mechanisms may offer 20–40% upside to FY25F net profits for coal names under our coverage.

Limited foreign inflows while increased retail participation boosted the JCI. JCI rose +8.0% MoM in July 2025, outperforming global peers, supported by gains in BREN, BRPT, and CDIA, despite net foreign outflows (figure 21) of IDR 7.1tn. Global sentiment improved as U.S. trade tensions eased following tariff agreements, yet domestic caution persisted amid tepid household consumption and disappointing 2Q25 earnings season, with 40% of covered stocks missing estimates and aggregate net profit down -5.9% YoY. In response, Bank Indonesia cut policy rates and reduced SRBI issuances, lowering IndoNIA rates and injecting liquidity. Retail participation surged, while institutional ownership declined (figure 22), underscoring diverging market dynamics. Meanwhile, bond inflows resumed on the back of lower yields and BI’s dovish stance.

Retain end-2025 core fundamental JCI at 7,400 with liquidity-driven target of 8,120. Following 2Q25 earnings season, we cut our FY25 JCI EPS growth to 0.5% (prev.: 1.6%) due to disappointing results. Our core fundamental target for JCI remains at 7,400 (figure 1), implying FY25F P/E of 13.0x (vs. regional average of 14.3x). We also set an alternative “liquidity-driven” target of 8,120, incorporating momentum from large-cap movers: DSSA, TPIA, DCII, BRPT, CDIA, PANI, PTRO, BREN, AMMN, and BYAN with aggregate PER of 296x (figure 4). Looking ahead, our base-case JCI scenario, helped by rotational plays into laggard stocks, assumes 157 points contribution from core fundamental picks under our coverage coupled with 720 points from liquidity-driven stocks. In this regard, SSI’s fundamental picks (figure 2) remain with: BBCA, TLKM, ICBP, AMRT, and JPFA while our alpha preferences (figure 3) are BKSL, ENRG, WIFI, RAJA, and DEWA.