Research & Stock Picks

Emiten Report

30 August 2023

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BBRI: BUY (Maintain), TP at IDR 6,400 – Grow together with Kupedes

Grow together with Kupedes

 

2Q23 results: slightly above ours, in line with cons

BBRI reported a consolidated net profit of IDR 13.9tn in 2Q23 (-10.2% QoQ and +10.3% YoY), which brought its consolidated 6M23 net profit to IDR 29.4tn (+18.7% YoY), slightly above ours (52.0% of our full-year forecast) and in line with cons (50.2%).The bank’s bottom line growth was partially driven by lower provision expense and higher non-interest income, mainly from the recovery of written-off assets (+37.5% YoY and +26.1% QoQ). However, BBRI’s NII slipped in 6M23, primarily due to higher interest expense, as the bank reported a higher CoF (Jun-23: 2.79%, end-2022: 2.06%). Despite this, BBRI managed to record better NIM in 2Q23 than in the previous quarter, supported by the change in loan portfolio mix, with more higher-yielding assets (Kupedes) in the portfolio, which helped lift the bank’s consolidated 1H23 yield. Bank-only loans grew by +8.5% YoY, supported by micro-segment (+10.4% YoY), though its NPL ratio increased slightly to 3.1% at the end of 1H23 vs. 3.02% in 1Q23.

 

BBRI’s main focus going forward

BBRI will continue to boost the growth of Kupedes and other ultra microloans (PNM and Pegadaian), which provide higher yields. Today, Kupedes accounts for 39% of BBRI’s microloans, up from 30% in the same period last year, while ultra microloans (PNM & Pegadaian) account for 9% of BBRI’s total loans, helping to increase its micro-to-total loan ratio to 48.1%, up from 47.0% in the same period last year, and the bank expects the figure to exceed  50% by 2025.

 

2023F guidance

In its analyst meeting, BBRI mentioned its microloan growth guidance for 2023F of 11-13%, driven mainly by Kupedes, making the segment BBRI’s primary loan growth driver (guidance: 10-12%). BBRI projected its cost of credit (CoC) would reach 2.2%-2.4% in 2023F, down from 2.55% in 2022. NIM is expected to remain flattish at 7.7%-7.9% in 2023F, and the bank also hinted that its loan growth might improve to 11-12% next year (2024F) even with lower KUR allocation.

BUY, TP of IDR 6,400

At this juncture, we decided to reiterate our BUY rating for BBRI and our TP at IDR 6,400/share, based on a 2023F PBV of 2.8x, on the back of the solid 2023F outlook. We believe BBRI will continue to book double-digit loan growth throughout 2024F, aided by the Kupedes program, which will result in a higher NIM despite some pressure from CoF. Additionally, BBRI has a solid capital structure, with a CAR of 26.65% in 6M23, above the industry average. Downside risks: worse-than-expected economic recovery, lower-than-expected NIM and loan growth, higher cost of credit, and higher opex.

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