1H23: Net profit growth of +140.8% YoY. DRMA posted another solid quarter in 2Q23, with revenue growth of +92.6% YoY. Even though there’s a slight QoQ drop (-10.0%), we believe it was nothing to worry about (the long Eid holiday in May disrupted automotive production). Regarding its cumulative 1H23 revenue, DRMA posted IDR 2.7 trillion (+72.3% YoY), beating our estimate (53.7% projected SSI), supported by revenue growth from all its business segments. The company’s main business segment (2W, 54.1% of DRMA’s total sales) reported sales growth of +67.9% YoY, in line with the growth in domestic 2W sales (+42.5% to 3.2 million units), which beat our estimate as well (SSI’s FY23F projection: 5.8 million units, prev: 5.5 million units), with AHM (market share: 73%) as DRMA’s largest customer (87.4% of DRMA’s 2W segment sales). Aside from 2W, DRMA’s 4W (30.4% of DRMA’s sales) and other segments also reported significant sales growth (+78.1% YoY and +77.6% YoY, respectively). Not only that, DRMA’s two main segments (2W and 4W) also posted massive jumps in GPM (+602bps YoY and +303bps YoY), pushing its consolidated 1H23 GPM to 17.7% (1H22: 13.6%).
Brilliant acquisition. The massive jump in DRMA’s profit margins helped boost its net profit to IDR 346 billion (+140.8% YoY), beating expectations by a considerable margin (63.2% of SSI’s FY23F forecast, 66.1% of consensus). It should be noted, however, that there was a one-off gain from the negative goodwill from the acquisition of Trimitra Chitrahasta (“TCH”, IDR 56 billion), which was completed in January 2023. Even without the one-off gain, DRMA will still book significant bottom-line growth (+101.9 % YoY). From February to the end of 1H23, TCH performed brilliantly, posting revenue of IDR 327 billion (FY23F target: 700 billion) and net profit of IDR 15.3 billion (FY23F target: 28 billion). These numbers represent potential contributions to DRMA’s FY23F revenue and net profit growth of +17.9% YoY and +7.1% YoY, respectively.
Forecast changes. Following DRMA's better-than-expected performance, we decided to revise our projections for the company, raising its FY23F revenue and net profit forecasts by +8.1% and +21.4%, respectively. We’re optimistic that DRMA will continue its positive performance throughout the rest of the year, with full-year revenue of IDR 5.5 trillion (+41.2% YoY) and net profit of IDR 665 billion (+68.6% YoY) (one-off gain excluded: IDR 609 billion, +54.4% YoY).
BUY, TP IDR 1,900. Aside from the inorganic growth potential from the acquisition of TCH, there are other positive catalysts that might help boost DRMA's future performance, including its new 4W component factory (which will commence operations this year, supplying components for national 4W market leader) and its EV-related projects (component localization and charging stations). We reiterate our BUY rating on DRMA rating with a new TP of IDR 1,900 (12.3x FY23F PE).