Defensive play with EBIT cushion stemming from efficiencies: BUY IDR 430 TP. On the back of ACES’ defensive nature, the stock has managed to outperform the market by 14.5% YTD, and we expect this to persist given continued concerns on the sector coming from softer-than-expected consumer purchasing power due to: 1) weaker commodity prices, 2) IDR depreciation, 3) high interest rates. Thus, while we have cut earnings (figure 5), we remain optimistic following its rebranding to AZKO as we expect continued efficiencies at the EBIT level, particularly through ACES’ opex discipline reflected through 10.7% decline in employee per sqm. This should provide cushion to its profitability and help support bottom-line. Nevertheless, we have lowered our TP to IDR 430 (prev: IDR 680), in line with our earnings changes. However, we continue to view current valuation of 8.8x 26F P/E and P/S of 0.7x as still appealing. BUY.

2Q26 and 3Q26 previews: partial recovery in cumulative 5M26 SSSG to 2.1%. We project 2Q26 revenue at IDR 2.1tn (-1.3% YoY; -10.5% QoQ) and net profit at IDR 143bn (-5.5% YoY; -12.6% QoQ), mainly due to normalization following the festive season. For 3Q26, we expect revenue of IDR 2.2tn (+6.5% YoY) helped by the company having raised ASP in Apr-Jun 26 (Pareto products by c.10%), although net profit was down to IDR 181bn (-3.8% YoY). On SSSG, 5M26 figure recovered to 2.1% from -2.7% in 5M25 and -4.2% in FY25, helped by store rebranding effort with better performances in Jakarta and Java ex-Jakarta with cumulative SSSG of +4.4% (5M25: -5.4%) and +3.0% (5M25: -3.7%). In ex-Java, SSSG was slower at -0.2% (5M25: -0.1%) due to a number of store openings that weighed on overall traffic of older stores. Worth mentioning that ACES views penetration in Java and Java ex-Jakarta as fairly mature at 67%, while ex-Java still stands at 33%, leaving ample room for growth.

Increasing ASP and stock buffers to cushion rising cash costs & inventory days. Amid ongoing geopolitical tensions, ACES encountered disruptions across several freight routes, causing inventory to decrease to ~211 days in 1Q26. To reduce potential logistics disruptions going forward, the company plans to rebuild stock buffer by normalizing inventory back to ~240 days. In parallel, management has increased ASP to offset cost pressures from CNY (+16.2% YoY) and USD (+4.7% YoY) appreciation against the IDR. Through these positive initiatives, ACES targets relatively stable YoY GPM of 47% in 2026F.

Toning down expectations on cost pressures and weak purchasing power. Given lower-than-expected SSSG readings in ex-Java areas, we revise down our FY26F revenue and net profit forecasts by 3.2% and 13.9%, respectively. Meanwhile, for FY27F, we lower our revenue and earnings estimates by 4.7% and 15.3%, respectively, as we expect elevated inflation on prolonged geopolitical tensions until late FY27F. Furthermore, continued IDR depreciation against both the USD and CNY is likely to pressure consumers’ purchasing capacity as the company raises ASPs. This results in lower revenue per store of IDR 26bn (-4.5% YoY) and softer overall sales performance. At the same time, ACES may face difficulties in fully transferring higher input, operational, and inventory-related costs to customers, which could further weigh on margins.