May 14, 2025
Short-term Dip, Long-term Growth Play

Market Commentary
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ACES reported a weak 1Q25 with net profit declined -31% YoY, mainly due to the seasonality of Eid Al-Fitr, AZKO rebranding and THR disbursement. However, this seasonal dip is in line with historical patterns which in our view should not raise concerns for investors.

Looking ahead, ACES is aggressively expanding to tier 2 and 3 cities outside Java and ramping up promotions—especially for lifestyle products, which now contribute 44% of sales. This shift supports a more trend-aligned product mix.
 


Having said that, margins in 2025 may remain soft due to higher promotions and a greater share of affordable products. Due to lower purchasing power and higher advertising costs, we also projected a soft net profit growth of 1% YoY for FY25. We expect earnings to start to recover by 2026 as we expect purchasing power to recover and company's expansion to be executed accordingly.
 


On the bright side, ACES stands on a solid financial position with Rp955bn net cash in 2024, capex limited to Rp 300bn in 2025, and a healthy 7% dividend yield. The company’s strong balance sheet and resilient model offer downside protection in tough times.
 

Amidst current tariff war, we find it wise to be cautious with companies whose products can be easily subtituted by Chinese products as we see a potential risk of products dumping from China. Aside from Chinese product dumping risk, current weak purchasing power is likely to hamper company's sales growth, which may weigh down company's share price even more.

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