Sector Strategy Outlook2021 14dec20rev.15 12 2020 - 00 27 18

FOCUS | XXX
FOCUS | Equity Strategy

Company Update | XX XXXXX 2013
Sector Update | 14 December 2020
Mandiri Sekuritas Analyst

Outlook 2021: Relief, Recovery, Reform
Adrian Joezer
2021 will be a year of relief, recovery, and reform, favoring equity as a growth-
+6221 5296 9415 sensitive asset. Cyclical outperformance is expected to continue, though we keep
adrian.joezer@mandirisek.co.id our defensive hedge as risks remain until mass vaccinations begin in 2Q21. We
Mandiri Sekuritas Research Team identified six investment themes that will shape 2021 and how investors should
position themselves. We expect JCI to end 2021 at 6,850.
Sector: Equity Strategy
Navigating the recovery. We turned 2021 JCI target at 6,850. Our bottom-up
more bullish on cyclicals by closing our estimates are for 40%/16% EPS growths in
OVERWEIGHT barbell strategy on 5-Nov, with JCI
delivering 14% return since then. We stick
2021/2022, compared to average ASEAN
ex-Indonesia EPS growth of 33%/16%. In
with our cyclical preference, though deriving our index target, we applied a
Stocks Recommendation mobility restrictions remain a risk until more conservative EPS growths of
mass vaccinations begin in 2Q21. Any 30%/12% in 2021/2022, with forward PE of
corrections should be opportunities to add 17x assuming 6.0% risk-free rate, 2.5% risk
Ticker Recom Price (Rp) TP (Rp)
while the market may look beyond it if premium, and 2.5% dividend yield. At the
ASII Buy 5,675 6,300 vaccine deployment is solid. 4Q20’s bullish prevailing risk-free rate, there is still scope
BBNI Buy 6,575 7,500 narratives have been dictated by the for further normalization in equity risk
BBTN Buy 1,840 1,900 promising vaccine results, but investors’ premium to its long-term average. Our
BSDE Buy 1,085 1,160 focus should soon shift to the production, BULL/BEAR index target is 7,300/5,270.
EXCL Buy 2,620 3,600 distribution, and social acceptance rate of
JSMR Buy 4,560 7,040 the vaccines. We expect backloaded 2021 Sticking with cyclicals preference.
MAPI Buy 895 1,000 EPS recovery, while pent-up demand Cyclical-over-defensive preference is
MIKA Buy 2,770 2,750 fueled with excessive domestic liquidity unchanged, though we keep a portion of
PGAS Buy 1,715 1,700 could be the upside risk. defensive, as the vaccines’ mass
SMGR Buy 12,000 11,020 deployment will only begin in 2Q21. Our
TLKM Buy 3,320 3,900 Six investment themes for 2021. We are preferred cyclicals are Banks (BBNI, BBTN),
UNTR Buy 27,400 31,700
optimistic that 2021 will not be just a year Building Materials (SMGR), Infrastructures
of recovery but the beginning for (JSMR), Property (BSDE), Commodities
Source: Mandiri Sekuritas estimates
structural reforms, upgrading Indonesia’s (UNTR), Industrials (PGAS), and Consumer
long-term investment thesis (i.e. quality of Discretionary (ASII, MAPI). Our preferred
growth and risk premium) compared to defensives are Telecom (TLKM, EXCL) and
the past eight years. We identified six Healthcare (MIKA). Consumer Staples is
major investment themes in Indonesia for our least preferred amidst a two-speed
2021: 1) vaccine-led recovery; 2) uneven economy.
normalization with post-pandemic
industry consolidation; 3) excessive Key risks: 1) Uncontrollable COVID-19
liquidity supporting 2021-22 recovery in outbreaks and mobility restrictions; 2)
growth, credit cycle, and fueling pent-up Vaccine deployment and acceptance; 3)
demand; 4) pursuit of yield and weak Unexpected geopolitical risks under the
dollar favoring Indonesia; 5) strong new US leadership; 4) Weakness in
commodity tailwinds entering 2021, and; commodity prices; 5) Poorly executed
and 6) the start of structural reforms with reforms post-omnibus law.
the emergence of Indonesia as a nickel/EV
supply-chain powerhouse.
Please see important disclosure at the back of this report Page 1 of 69

This report is intended exclusively for Mandiri Sekuritas Research. Unauthorized distribution is prohibited
Table of Contents
2021 Investment Thesis ....................................................................................................... 3
2021 Sectoral View ............................................................................................................... 4
2020 Review .......................................................................................................................... 7
Earnings Growth Outlook .................................................................................................... 8
2021 Investment Themes................................................................................................... 10
Vaccine-Led Recovery ......................................................................................................................... 10
Uneven Normalization with Post-Pandemic Industry Consolidation ................................. 15
Excessive Liquidity Supporting 2021-22 Growth ...................................................................... 18
Pursuit of Yield and Weak Dollar Favoring Indonesia .............................................................. 21
Strong Commodity Tailwinds .......................................................................................................... 25
Structural Reforms: Omnibus Law, Emerging Nickel/EV Powerhouse ............................... 29
Index Target and Valuations ............................................................................................. 36
End-2021 JCI Index Target of 6,850 ................................................................................................ 36
Valuations ............................................................................................................................................... 37
Stock Recommendations ................................................................................................... 39
Sector View .......................................................................................................................... 41
Automotive ............................................................................................................................................ 41
Banking .................................................................................................................................................... 43
Building Material .................................................................................................................................. 45
Coal Mining ............................................................................................................................................ 47
Construction .......................................................................................................................................... 49
Consumer Staples ................................................................................................................................ 50
Healthcare............................................................................................................................................... 51
Mining ...................................................................................................................................................... 53
Media ........................................................................................................................................................ 55
Oil and Gas .............................................................................................................................................. 56
Poultry ...................................................................................................................................................... 57
Property & Industrial Estate .............................................................................................................. 59
Retail ......................................................................................................................................................... 61
Telecom ................................................................................................................................................... 63
Toll Road .................................................................................................................................................. 65
FIGURE 1. OUR MOST PREFERRED STOCKS (IN ALPHABETICAL ORDER)

Last Target Mkt PE PBV EV/EBITDA EPS growth Rel. performance to
Ticker Company Name Rating Price Price cap (x) (x) (x) (%) JCI
(Rp) (Rp) (Rp Bn) 20F 21F 20F 21F 20F 21F 20F 21F 1M 3M 6M
ASII Astra International Buy 5,675 6,300 229,744 12.9 12.7 1.5 1.4 10.8 9.2 -18.2 1.9 -13.9 2.0 -4.7
BBNI Bank Negara Indonesia Buy 6,575 7,500 122,615 28.9 8.9 1.1 1.0 N.A. N.A. -72.4 223.7 6.3 13.7 23.9
BBTN Bank Tabungan Negara Buy 1,840 1,900 19,486 12.9 9.2 1.1 1.0 N.A. N.A. 621.6 40.4 3.8 16.9 40.4
BSDE Bumi Serpong Damai Buy 1,085 1,160 22,971 16.4 11.2 0.7 0.7 12.1 11.3 -54.4 46.5 -4.2 27.2 19.6
EXCL XL Axiata Buy 2,620 3,600 27,902 12.8 20.8 1.3 1.3 4.8 4.4 207.9 -38.7 4.3 -1.1 -20.9
JSMR Jasa Marga Buy 4,560 7,040 33,096 59.4 16.9 1.8 1.6 22.1 12.1 -74.7 251.0 0.3 10.2 -8.6
MAPI Mitra Adiperkasa Buy 895 1,000 14,857 -8.7 27.3 3.5 3.1 -138 8.7 n/a n/a 8.4 25.6 -3.9
MIKA Mitra Keluarga Karyasehat Buy 2,770 2,750 40,306 73.7 61.2 8.9 8.1 48.7 39.2 -25.1 20.5 10.9 5.5 -6.8
PGAS Perusahaan Gas Negara Buy 1,715 1,700 41,574 27.5 13.3 1.1 1.1 8.2 6.6 56.4 109.1 35.2 33.3 40.9
SMGR Semen Indonesia Buy 12,000 11,020 71,178 28.2 25.2 2.1 2.0 10.9 10.3 5.4 12.1 -3.0 5.3 4.5
TLKM Telkom Indonesia Buy 3,320 3,900 328,887 17.0 15.6 3.2 3.1 5.9 5.7 4.0 8.4 0.9 -1.6 -12.1
UNTR United Tractors Buy 27,400 31,700 102,206 14.2 9.6 1.6 1.4 5.7 4.3 -36.6 47.8 19.6 2.7 43.4
Note: Additions: MIKA, SMGR, JSMR, MAPI. Deletions: UNVR, ICBP, INTP, MDKA. Source: Bloomberg, Mandiri Sekuritas estimates

2021 Investment Thesis

FIGURE 2. MANDIRI SEKURITAS VIEW ON 2021 INVESTMENT THESIS
2021 JCI Index Scenario BASE BULL BEAR
End-2021 JCI Index 6,850 7,300 5,270

2020 JCI EPS Growth -28% -25% -28%
2021 JCI EPS Growth +30% +32% +25%
2022 JCI EPS Growth +12% +10% +8%
Risk-free-rate 6.0% 5.8% 6.5%
2021 Investment Thesis Across Asset Classes

Real GDP growth of 4.4% in 2021 from -1.8% in 2020. Base projection sees GDP growth recovering to 2.5% in 1Q21 and 5.0-
5.1% range afterward. Normalization in inflation will begin, albeit manageable within the 3.0% range vs. 1.4% this year. Room
Macro View
for rate cut is limited. CAD will rise as imports increase, notably for vaccine needs, though the deficit pressures should partially
be neutralized with higher portfolio inflows. FDI inflows post-omnibus law era skewing toward 2H21.
Indo GB 10Y yield of 5.75-6.00% by end-2021, a smaller capital gain than this year, as we expect no more rate cuts, though
attractive real yield makes it a standout. Continued low-interest-rate environment and flush global liquidity will provide
Bond Market View
support, while bond supply risk appears manageable, given the burden-sharing scheme, flush domestic liquidity, and excess
2020 deficit financing.
2021 JCI Index of 6,850 with BULL/BEAR targets of 7,300/5,270. Base case assumes +30%/+12% EPS growth in 2021/2022 from
-28% in 2020. With 6.0% risk-free rate and 2.5% risk premium, we set JCI's forward PE at 16.9x by end-2021. Remain
Equity Market View
constructive on cyclicals/value-stocks over defensives as EPS recovery dominates 2021 theme. Post-omnibus law reforms are
not fully priced in, which could address the structural BoP issues and potentially upgrade future investment case in Indonesia.
1) Renewed dollar weakness; 2) supportive monetary and fiscal; 3) continued commodity price strength; 4) FDI inflows with
Upside Risks further evidence of Indonesia entering a new cycle of commodity boom, as it fits in with the global green initiative, and;
5) mid-term upside from the mineral industry downstreaming.
1) Uncontrollable COVID-19 outbreaks and mobility restrictions; 2) issues in vaccine deployment; 3) unexpected geopolitical
Downside Risks risks under the new US leadership; 4) contractionary fiscal risks, as Indonesia needs to transition to the 3.0% deficit ceiling by
2023, and; 5) poorly executed reforms post-omnibus law.
2021 Equity Investment Themes

With the deployment of vaccines, 2021 will be the year of global economic recovery, favoring riskier assets such as equities
Vaccine-Led Recovery
and EM over DM. Cyclicals’ outperformance should continue. Expect backloaded EPS growth recovery.
Since 2019, we have argued for industry consolidation taking place within sectors that generate below-WACC ROIC. The
Uneven Normalization
pandemic should accelerate the process, particularly across retailers, restaurants, and land transport providers. Cost and
with Post-Pandemic
CAPEX efficiencies will continue along with digital adoption. Recovery has been a two-speed process, favoring the mid-upper.
Industry Consolidation
Leaders’ market shares could recover stronger post-pandemic.
Excessive Liquidity We expect industry loan growth of ~7% next year from nearly flat this year. Domestic liquidity is excessive, with an 8-year low
Supporting 2021-22 LDR and the lowest loan-to-M2 growth ratio since the AFC, strongly supporting 2021-22 recovery. Stimulative fiscal &
Growth monetary policies, vaccine deployment, and pent-up demand are key catalysts.
Low interest rates to persist in 2021, as global central banks' policies should remain accommodative. Consensus sees renewed
Pursuit of Yield and Weak weakness in the US dollar, given the real yield spread to EM and the expectation for a global economic recovery, while large
Dollar Favoring Indonesia fiscal stimulus likely continues. The hunt for yield and weak US dollar should benefit Indonesia, which has high real yield,
cyclical/value-stock exposures, and relatively reasonable equity valuations.
Commodity prices have recovered strongly, providing strong tailwinds into 2021. Some are driven by supply disruptions
Strong Commodity
because of the pandemic, coupled with adverse weather and years of underinvestment within some commodities. Meanwhile,
Tailwinds
demand recovery is in sight for 2021, with several countries seeing PMIs exceeding their pre-pandemic levels.
Weak BoP structures with recurring twin-deficit issues and high reliance on foreign bondholders have weakened the
investment case on equity. Wealth creations have stagnated after years of coal and CPO price downturns. The long-awaited
Structural Reforms:
omnibus law has been passed this year, though the effects on FDI are yet to be seen, hence not priced in. With the global
Omnibus Law, Emerging
quest for green energy initiatives, Indonesia has also been undergoing nickel downstreaming investments, with further
Nickel/EV Powerhouse
ambition of inviting FDI for EV battery production. BoP reforms post-omnibus law approval should also see further
improvement.
2021 Most and Least Preferred Trades

Preferred cyclicals: Banks (BBNI, BBTN), Cement (SMGR), Infra (JSMR), Property (BSDE), Commodities (UNTR), Industrials (PGAS),
Most Preferred
and Consumer Discretionary (ASII, MAPI). Preferred defensives: Telecom (TLKM, EXCL) and Healthcare (MIKA)
Least Preferred Consumer Staples
Source: Mandiri Sekuritas Research

2021 Sectoral View

FIGURE 3. 2019 SECTOR VIEW: BASE, UPSIDE, AND DOWNSIDE CASES
Key Sectors Base View Upside Risks Downside Risks
We believe recovery in both 4W and 2W

will be more gradual than V-shaped, as
we also expect gradual recovery in
purchasing power. We forecast 4W
wholesales to reach 834k units in FY21F
(+25% YoY), higher than ASII’s internal
forecast of 750k units. We expect
Faster than expected economic Slower economic growth, weak
commercial vehicle sales to recover
recovery and continued support in purchasing power, price competition
Automotive faster than passenger car sales,
financing (up to 75% of sales) would amid weak demand, and drastic change
indicating recovery in economic
support both 4W and 2W sales. in behavior toward online taxis.
activities. Though people prefer to use
private vehicles to avoid crowds, weak
purchasing power and priority shift in
spending hinder growth in 2W sales.
Thus, we forecast 4.8mn units (+25%
YoY) of 2W sales in FY21F, still up to
38% lower than in 2019.
We expect loan growth to recover to 8%
YoY in 2021 on the back of economic
growth reacceleration. Sector earnings
recovery will be driven by NIM
Continued fiscal support in sectors most
improvements and cost of credit
hit by the COVID-19 pandemic and Stalling economic growth and over-
stabilization as banks work to increase
strong FDI realization could trigger extended population movement
LDR, see the prospect of lower cost of
faster-than-expected GDP recovery, restrictions due to prolonged COVID-19
Banks fund, and benefit from the loan
which should catalyze stronger loan pandemic could restrict loan growth
restructuring relaxation program’s
growth and asset quality improvement and pose risk of a high lapse rate of
extension to 2022. All banks in our
in 2021 (drivers to positive earnings restructured loans into NPL in 2021.
coverage, except BBCA, also trade
surprise).
within 1 standard deviation below their
long-term forward PBV averages and
could see valuation recovery on the
back of ROE turnaround in 2021.
Cement volume should post 5% YoY
volume growth in 2021. While overall
weakness should continue into 2021,
Smaller players gaining market share
solid property presales and strong
ahead of expectations, consolidations
infrastructure budget growth are
Quicker-than-expected recovery in which benefit smaller players rather
Building Materials encouraging. We expect the pricing and
demand than incumbents, aggressive pricing by
market share of incumbents to hold
large players, and early onset of ODOL
steady next year, as qualitative issues
implementation
(such as distribution network and
payment terms) should be challenging
for new and existing smaller players.
As coal prices have recovered from the
Aug-20 low, we see a stronger earnings
outlook for next year from higher coal
Upside risks to seaborne coal prices may
prices, driven by improving demand Slower demand recovery from the
come from 1) potential demand
from both export and domestic export market (particularly from India
recovery from India and new import
Coal Mining markets. We forecast coal price to and China) and lower import demand
quota from China; 2) production risk in
recover to USD 70/ton in 2021-2022 from China due to higher domestic coal
1Q21 due to La Nina, and; 3) slower
from USD 60/ton in 2020. The current production
production recovery in Indonesia.
sentiment on coal price has been
strong, as the market anticipates
recovery next year.
We expect new contracts to grow by 30- Successful initiation of Nusantara
Delays in Nusantara Investment
40% YoY from the low-base 2020, Investment Authority (Indonesia’s first
Authority will be the downside risk for
considering an improvement in CAPEX sovereign wealth fund) would provide
the construction sector, especially for
from the government, SOE companies, ample financing for new infrastructure
WSKT. Meanwhile, delays in
and private sector. Meanwhile, we projects and limit SOE contractors’
Construction construction progress payment will lead
expect slow recovery in revenues and balance sheet usage. Further, faster-
to slower revenue recognition, as the
earnings due to a shortage in 2020 new than-estimated asset recycling will
SOE contractors will closely monitor
contracts achievement. The sovereign unlock WSKT’s toll road asset value and
OCF due to PSAK 71 implementation on
wealth fund initiative will be the game- deleverage its balance sheet, leading to
receivables impairment.
changer in the sector. potential rerating for the company.

FMCG allocation will likely be reduced,

The downside risk is a sudden reversal
given the pent-up demand for
Persistently high CPO prices could in CPO prices, giving some risks to ex-
discretionary spending. The
partially offset weak purchasing power, Java purchasing power. Soft
Consumer (Staples and government’s commitment to restore
as more than 20% of labor force are commodities’ costs have also been
Tobacco) purchasing power will result in the
agri-related. Renewed dollar weakness rising for almost all key raw materials
continuance of subsidy and social
could help margins. (wheat, skimmed milk powder, sugar,
assistance, despite the normalization
and coffee).
after the 2020 high-base.
Hospital result will still be robust in
2021F, with or without COVID-19. Faster
BPJS Kesehatan payment, thanks to its
We see upside risk for hospitals coming Key downside risks for hospital sector
financial surplus, has eased working
from new revenue stream from COVID- are lower government reimbursement
capital pressure in hospitals and will
Healthcare 19 vaccination, whose magnitude is rate for COVID-19 treatment, COVID-19
likely be maintained going forward.
largely unknown and has not been vaccine delay, and cancellation of
BPJS Kesehatan's standard class policy
priced in by the market. standard class policy.
will be the next catalyst for hospitals, as
this will bring back the more profitable
segment (private patient).
Improving purchasing power and
overall economic outlook will trigger
Purchasing power will be supported by Slower economic growth might put
advertisement demand from FMCG
favorable commodity prices outlook advertisement revenue recovery at risk,
companies. This will help media
(i.e., CPO and coal) and the while rising soft commodity prices (i.e.,
companies see a positive revenue trend
Media government's commitment to keep the wheat, sugar, etc.) will also depress
in 2021. In addition, revenue
financial aid next year. This will not only FMCG companies' margin. This can lead
diversification from digital platforms
increase ads slot utilization in FTA TV, to lower A&P activities from FMCG
will also help media groups secure long-
but also in digital platforms. companies.
term growth and support valuation
rerating in the future.
The nickel industry dynamics have
changed after Indonesia surprisingly
implemented the first nickel ore export
ban in 2014, leading to a “migration” of
Chinese NPI players to Indonesia
(Morowali) to secure nickel ore supply,
Strong NPI production growth from Slower recovery in nickel demand for
the key ingredient to produce NPI.
Indonesia will replace China due to the stainless steel and slower growth for
Indonesia’s nickel production increased
Metal Mining availability of nickel ore supply. More battery production. Strong nickel
from only 100k tons in 2015 to around
upside on nickel demand from battery production growth from Indonesia
480k tons in 2019. The Ministry of ESDM
supply chain. leads to oversupply in the market.
forecasts Indonesia’s nickel production
to increase to around 1.1mn tons by
2024 or around 18% CAGR, driven by
growing NPI production, of which
around 80% is for stainless steel and
20% for battery.
We see a possibility of broiler and DOC Higher bottom-line is expected if:
price stability in 2021, given successful corn harvest continues in
Weaker-than-expected poultry demand,
deceleration of GPS import quota in 2H20, dine-in activities' foot traffic
Poultry failed corn harvest season, and soaring
2019-20 and higher effectiveness of recovers stronger than expected, and
soybean meal prices.
culling regulations due to a more there is consolidation of downstream
transparent approach. channels.
2021 should continue to see strong
residential property presales, as
developers have increasingly tapped
into the sub-IDR 1.5bn/unit sweet spot.
We think growth in this price segment is
Better-than-expected demand,
sustainable, as it caters reasonably well
especially if purchases by foreigners
to affordability. We forecast 10-20% YoY
materialize sooner than expected. Sudden increases in bond yields and
presales growth across developers we
Quicker monetization schemes, such as weakening rupiah.
Property & Industrial Estate cover. Low interest-rate environment
REITs or bulk asset sales, could also
should provide further aid. On the
provide further catalysts.
recurring income segment, we forecast
the current discounts to continue in
8M20, although beyond that, the sector
will look attractive as a solid recovery
proxy.
Industrial estates continue to be a solid Better-than-expected industrial land Weaker-than-expected demand
investment proxy, especially looking sales, as DMAS has outperformed turnout, notably if industrial estates

ahead post-pandemic with the omnibus expectations annually the past 2 years. further east pose significant threats,
law in place. We are less concerned Faster monetizing for its residential and which would raise structural risks for
about threats from competing industrial commercial lands should also provide West Java industrial estates.
estates in other regions. Our forecasts meaningful upside surprise.
for our covered names are still lopsided,
with DMAS performing significantly
better than BEST.
COVID-19 may stay for a while, at least
until public vaccination in 2Q21, and we
remain cautiously optimistic on the
sector. Therefore, stock-picking should
Key downside risks for retail sector are
consider these filters: 1) avoid heavy Key upside risks include faster-than-
COVID-19 vaccine delay, slower-than-
dependency to Eid festive season; 2) expected vaccination timeline, which
Retail expected purchasing power recovery,
seek business models that are most would lead to faster-than expected
drastic consumer behavior changes
resilient and that will recover better; 3) economic recovery.
toward brick-and-mortar stores.
target middle-up segment. Rigorous
cost efficiencies throughout 2020F and
operating leverage may lead to quicker
turnaround.
Natural gas demand will continue to
recover, though we think it might take
another 3-6 months to see the demand
Faster-than-expected natural gas There is an issue to extend the new gas
return to pre-COVID-19 level. However,
demand recovery, as we have seen in price of USD 6/MMBTU to all industries
we also expect significant progress from
2H20. Additionally, the government instead of 7 industries and power
PLN's gasification projects, which
may give incentives for both upstream sectors as stipulated in both Presidential
should help the industry see more gas
and downstream players in the industry. Decree and Ministerial Decree of MEMR.
Oil and Gas demand. To note, the gasification
Lastly, improving crude oil price outlook This could lead to distribution spread
projects must be completed by 1Q21, as
due to faster global economic recovery and ROE decline, although we think the
stipulated in the Ministerial Decree of
will also help upstream contractors see implementation will not materialize in
MEMR. In addition, we think asset
better financial performance going 1H21, given the requirement to revise
impairment will be limited going
forward. previous regulations.
forward, as companies like PGAS have
reduced their LT oil price assumption
significantly.
Mobile industry has potential to recover
revenue growth to low-to-mid single-
digit rate and maintain flattish EBITDA
margins in 2021. Towercos will continue Economic growth reacceleration could Irrational mobile competition, especially
to benefit from mobile operators' focus help improve mobile data pricing in the mobile data segment, could
on national 4G LTE network expansion, trends, hence mobile operators' prevent earnings recovery among
but towercos' revenue & EBITDA growth profitability in 2021. Corporate mobile operators and restrict 4G LTE
Telecommunication
will likely taper to a high single-digit restructuring and M&A options are still capex that supports towercos' growth.
rate in 2021. Valuation rerating available for telcos and towercos to Reversal in interest rate trends could
opportunities are available for the unlock value and generate stronger also drag earnings growth and bring
telcos and towercos, given the benefits earnings growth in 2021. valuation derating.
from tech convergence, Job Creation
Bill's follow-up, and declining interest
rates in 2021.
Traffic is potentially higher than pre-
Higher-than-estimated traffic as people
pandemic level as mass public
will try to avoid mass public Another round of strict social distancing
transportation may not immediately
transportation, along with faster-than- (PSBB) implementation will directly
normalize. Favorable macro
Toll Road estimated economy reopening by the impact JSMR's toll road revenues.
environment due to lower cost of funds
government. Further decline in BI rate COVID-19 handling is key to minimize
and 10Y government bond yield leads
will also lead to a lower cost of funds, the potential strict PSBB.
to a potential rerating in JSMR's DCF
which translates to higher earnings.
valuation.

2020 Review
The depth of the global economic contraction in 2020 was indeed unprecedented, but so
were the monetary and fiscal stimulus responses to the COVID-19 pandemic, in both size
and speed. Global stock markets bottomed at the end of March, as the haven asset (i.e., the
US dollar) reversed along with a series of unprecedented global stimulus. Months of
lockdown and fears of virus pushed for massive technology adoption across consumers
and companies, and drove cost-cutting measures, risking low-skilled jobs’ recovery. Light
has appeared at the end of the tunnel, with vaccine manufacturers announcing
constructive phase three results, fueling further rallies in risk-assets in 4Q20.
Indonesia’s twin-deficit economy with very weak fiscal capacity and its reliance on overseas
bondholders have always been the issues in investing in the country; hence, the stock
market underperformance in the first nine months of 2020. Abundant liquidity—given the
fall in the capex cycle, along with the return of the current account surplus amid weak
imports—partially helped finance the higher-than-usual fiscal deficit. The JCI Index
dropped as much as 38% when the pandemic first hit Indonesia, reaching its bottom in
end-March. The initial rebound was first helped by defensive sectors, such as towercos,
consumer goods, and telecommunication services. Reopening trades outperformed when
lockdowns ended in July, while vaccine optimism fueled further rotations into cyclicals in
4Q20. We decompose the JCI’s return breakdowns below.
FIGURE 4. JCI INDEX’S FORWARD PE BAND FIGURE 5. YTD 2020 INDEX PERFORMANCE COMPARISONS
18 12M fwd PE Japan 18%

13%
17 India 8%
+2 StDev 12%
China 17%
16 10%
+1 StDev 9%
Vietnam 9%
15
Mean Malaysia 7%
14 6%
US 5%
13 -1 StDev 5%
Indonesia -7%
-6%
12 -2 StDev -6%
Hong Kong -6%
11 Thailand -7%
-6%
10 Euro 1% USD
-7%
9 Philippine -2% LCY
-7%
8 -12%
Singapore -12%
Jul-11
Mar-12
Oct-12
Jan-14
Sep-14
Jul-16
Mar-17
Oct-17
Jan-19
Sep-19
Dec-10
Apr-15
Dec-15
Apr-20
Dec-20
Jun-13
Jun-18
-15% -10% -5% 0% 5% 10% 15% 20%
Source: Bloomberg, Mandiri Sekuritas Note: 2020 is up to 11-Dec-20. Source: Bloomberg, Mandiri Sekuritas
FIGURE 6. BREAKDOWN OF SECTOR RETURNS IN 2020 RELATIVE TO 2019

Mandiri Sekuritas Sector Return (%) EPS growth (%) Forward PE (x)** Forward PBV (x)**
Universe 2019 2020* 2019 2020* 2019 2020* Chg 2019 2020* Chg
Financials 16.9 (0.4) 3.7 (33.4) 17.9 26.8 9.0 2.4 2.5 0.1
Construction & materials 3.3 (13.9) (20.7) (70.9) 16.6 57.0 40.4 1.5 1.6 0.1
Consumer staples (21.7) (14.7) 14.7 (16.1) 17.9 21.3 3.4 4.9 4.7 (0.1)
Healthcare 64.9 (1.1) (14.2) 30.2 93.0 71.5 (21.6) 4.9 4.7 (0.2)
Consumer discretionary (9.8) (16.8) 1.6 (29.8) 11.3 16.2 4.8 1.8 1.7 (0.1)
Commodities (9.1) 30.7 (22.4) (30.0) 14.4 20.6 6.2 1.6 1.5 (0.1)
Property & Industrial Estate 13.5 (7.3) (11.0) (29.2) 14.8 21.3 6.5 1.0 1.0 (0.0)
Telecommunication 11.7 (12.0) 56.2 (0.7) 18.3 18.4 0.1 3.1 2.9 (0.1)
Transportation (13.2) (43.0) (31.2) (155.7) 11.3 (20.3) (31.6) 0.7 0.7 0.0
Poultry (13.6) (4.5) (20.8) (46.2) 21.8 40.5 18.7 3.6 3.4 (0.2)
Oil and Gas 2.4 (23.7) (78.6) 61.2 42.8 26.6 (16.3) 1.1 1.0 (0.1)
Note: *2020 closing prices as of 11-Dec; **Figures are based on year-end position of the forward valuation multiples
Source: Bloomberg, Mandiri Sekuritas estimates

Earnings Growth Outlook

3Q20 earnings review. After two quarters of sequential declines, MANSEK universe’s
aggregate earnings recovered 20% QoQ in 3Q20, narrowing the YoY decline to -43% from
-49% in 2Q20. Improvement was predominantly driven by the lockdown reopening across
most cities, tapered by Jakarta’s reimposed lockdown in September. Ex-Banks, the 3Q20
corporate revenues increased by 9% QoQ, with YoY decline improving slightly to -18%
from -22% in 2Q20. While earnings’ improvement trajectory is still considered mild, we
expect further improvement in 4Q20, considering: 1) Jakarta’s lockdown ended in October;
2) the stronger fiscal spending absorption; 3) the tailwind from strong palm oil and coal
prices, and; 4) the support from IDR strength against US dollar. The street now projects YoY
earnings decline across MANSEK universe to improve to -16% in 4Q20.
FIGURE 7. SUMMARY OF MANSEK UNIVERSE’S NET PROFIT GROWTH

Net Profit, QoQ Net Profit, YoY
Sectors
4Q19 1Q20 2Q20 3Q20 4Q19 1Q20 2Q20 3Q20
Banking 1% 1% -61% 47% 2% 5% -57% -41%
Building Materials 31% -52% -72% 568% 16% 27% -49% 17%
Infrastructures 60% -64% -271% n.m -9% -57% -186% -271%
Consumer staples 15% -5% -36% 5% 14% 12% -25% -27%
Hospital -147% n.m -108% n.m -199% 18% -110% 60%
Consumer discretionary 1% -24% -86% 297% 32% -15% -90% -58%
Mining -31% -7% 26% -57% -31% -45% -27% -65%
Plantation n.m n.m n.m 6% -129% n.m n.m n.m
Property 69% -190% n.m -93% -15% -232% 3% -94%
Telco -20% 44% -10% 1% 1641% 11% 16% 4%
Oil and Gas -182% n.m -190% n.m -168% -26% n.m -35%
Transportation 20% -84% -864% n.m -31% -84% -253% -190%
Poultry 59% -27% -62% 45% 6% 5% -68% -36%
Total 0% -11% -47% 20% 7% -10% -49% -43%
Source: Bloomberg, Company, Mandiri Sekuritas
Forecasting 40% earnings growth in 2021 and 16% in 2022. Our bottom-up estimates
call for 40% earnings growth recovery in 2021 after a 28% drop in 2020, with 2022 growth
estimated at 16%. We expect corporate ex-banks revenue growths of 14%/8% in
2021/2022 against a -13% decline in 2020, with EBIT growths of 27%/11% from -23% this
year. We expect all sectors to deliver positive earnings growth in 2021, with cyclicals
driving the recovery momentum much higher than the defensives.
FIGURE 8. SUMMARY OF MANDIRI SEKURITAS’ REVENUE, EBIT, AND NET PROFIT GROWTH FORECASTS FOR 2020-22
Revenue Growth EBIT Growth Net Profit Growth EBIT margin
Sectors
2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
Financial n.a. n.a. n.a. n.a. n.a. n.a. (33.4) 58.1 15.6 n.a. n.a. n.a.
Construction & materials (23.6) 23.2 14.6 (28.2) 45.7 19.0 (70.9) 120.5 38.4 13.5 16.0 16.7
Consumer staples (3.9) 17.1 9.8 (18.7) 25.0 13.5 (16.1) 26.4 17.1 13.3 14.2 14.7
Healthcare (4.9) 11.8 16.2 (23.2) 32.9 23.2 30.2 28.3 22.9 11.8 14.0 14.9
Consumer discretionary (22.3) 16.3 8.1 (45.0) 51.4 8.9 (29.8) 22.8 16.0 7.8 10.2 10.3
Commodities (19.1) 8.5 2.8 (30.7) 24.2 7.5 (29.4) 37.0 13.8 12.7 14.5 15.1
Property & Industrial Estate (11.7) 11.7 2.3 (16.7) 17.2 4.4 (35.8) 54.6 11.0 28.7 30.1 30.7
Telecommunication 1.5 6.0 5.9 0.2 10.6 9.3 (0.7) 6.6 15.6 26.1 27.2 28.1
Transportation (42.3) 58.3 12.7 (164.3) n.a. 32.2 (155.7) n.a. 20.6 (10.3) 10.0 11.7
Poultry (7.5) 14.4 7.6 (41.5) 62.3 6.8 (46.2) 86.5 11.6 5.4 7.7 7.6
Oil and Gas (27.2) 11.0 13.6 (46.8) 26.3 21.1 61.2 107.4 38.4 9.8 11.2 11.9
Mandiri Universe (13.2) 14.0 8.2 (23.3) 26.6 11.1 (28.0) 40.3 16.5 13.8 15.4 15.8

FIGURE 9. SECTOR CONTRIBUTORS TO OUR 2020F-22F EARNINGS GROWTH

(%) 2020 (%)
50.0
2021 40.3 (%) 2022
5.0 1.4 1.1 0.9 45.0 40.3
0.1 0.0 1.4 0.1
40.0 2.7 2.5 1.7 40.0
0.0 3.5
-0.1 -1.0 30.0 20.7 5.7 35.0
-5.0 -1.3 -2.8 20.0 30.0
-10.0 -3.0 10.0 25.0
-15.0 -3.6 0.0 20.0 0.4 0.1 16.5
0.5 0.3
-3.6 -10.0 15.0 1.6 1.6 1.3 1.2
-20.0 3.3
-20.0 10.0 6.2
-25.0 -30.0 -28.0 5.0
-30.0 -12.8 -28.0 -40.0 0.0
Commodi…
Healthcare
Property
Property
Healthcare
Cons. discret
Financials
Construction
Financials
Poultry
Commodities
Construction
Commodities
Poultry
Telecom
Telecom
Cons. staples
2019
Others
2020
Cons. staples
Cons. discret
2020
Others
2021
Property
Healthcare
Financials
Construction
Poultry
Telecom
Cons. staples
Cons. discret
2021
Others
2022
Where we stand against consensus. Our 2020/2021/2022 estimates for our universe are
1.5%/6.4%/3.8% above consensus; the deviations came from our bullish estimates on
Banks, Consumer Discretionary, Consumer Staples, and Property. Our estimates are
considerably lower than the street’s on Construction & Materials, Healthcare, and Telecom.
FIGURE 10. SUMMARY OF MANDIRI SEKURITAS’ 2020-22 NET PROFIT FORECASTS RELATIVE TO CONSENSUS
MANSEK (Rp bn) Consensus (Rp bn) Mansek/Consensus (%)
Sectors
2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
Banking 64,115 101,348 117,120 62,496 90,970 114,933 2.6% 11.4% 1.9%
Construction & materials 3,664 8,077 11,182 2,732 8,860 11,826 34.1% (8.8%) (5.4%)
Consumer staples 38,546 48,734 57,076 40,653 44,985 49,487 (5.2%) 8.3% 15.3%
Healthcare 842 1,080 1,328 1,010 1,300 1,516 (16.6%) (16.9%) (12.4%)
Consumer discretionary 21,000 25,795 29,909 18,254 25,110 30,539 15.0% 2.7% (2.1%)
Commodities 17,004 23,292 26,513 17,335 23,595 27,304 (1.9%) (1.3%) (2.9%)
Property & Industrial Estate 5,740 8,875 9,852 4,280 7,700 8,177 34.1% 15.3% 20.5%
Telecom 24,823 26,452 30,575 26,237 27,705 30,902 (5.4%) (4.5%) (1.1%)
Oil and Gas 1,511 3,133 4,337 1,241 1,834 2,227 21.7% 70.9% 94.7%
Transportation -175 251 303 -227 137 256 (22.7%) 83.0% 18.4%
Poultry 2,988 5,574 6,218 3,418 5,202 6,435 (12.6%) 7.2% (3.4%)
MANSEK Universe 180,058 252,612 294,413 177,429 237,398 283,600 1.5% 6.4% 3.8%
Delta of earnings downgrades may have bottomed. The 3Q20 earnings have been quite
decent despite Jakarta’s reimposed lockdown. We expect a stronger 4Q20 on account of:
1) the end of Jakarta’s lockdown; 2) IDR appreciation; 3) strong commodity prices, and; 4)
pent-up demand at year-end.
FIGURE 11. CONSENSUS 2020-21F EPS FORECAST TREND FIGURE 12. JCI EPS GROWTH VS. IDR/USD CHANGES
500 40%
450 30%
20%
400
10%
350
0%
300 -10%
250 -20%
-30%
200
Jan-10
Oct-11
Sep-14
Jan-17
Aug-10
Mar-11
May-12
Jul-13
May-19
Jul-20
Dec-12
Aug-17
Mar-18
Oct-18
Dec-19
Feb-14
Apr-15
Nov-15
Jun-16
2020F 2021F
150
Oct-20
Nov-20
Jan-20
Apr-20
Mar-20
Dec-20
Aug-20
Feb-20
May-20
Jul-20
Sep-20
Jun-20
JCI Trailing EPS, YoY USD/IDR, YoY
Source: Factset Source: Bloomberg, Company, Mandiri Sekuritas

2021 Investment Themes

Vaccine-Led Recovery
Rotations into cyclicals, value stocks, and laggards should continue into 1Q21. We
officially closed our barbell portfolio strategy in early November (Stronger Ground for Re-
Rating, https://www.mandirisekuritas.co.id/r/XsBb?c=rsch, dated 5-Nov-20) as the US election
concludes while the announcement of the vaccines’ late-stage results from Pfizer,
Moderna, and AstraZenecca triggered further value rotations. Our cyclical preference
remains unchanged; we favor Banks, Building Materials, Commodities, Infrastructures,
Property, Industrials, and Consumer Discretionary. While these sectors have strongly rallied
in 4Q20, what have not been priced in are the reforms’ execution of the approved omnibus
bill and the potential renewed weakness of the US dollar. On another front, we expect fiscal
and monetary policies to remain favorable. The vaccine deployment could be a risk, as
economic recovery could be delayed if there were any disruptions. However, we still see a
vaccine-led recovery supporting the cyclicals continuing into 1Q21. Catch-up laggards will
benefit too; in this case, we like SMID-cap cyclicals. We discuss this in the stock-picks
section.
FIGURE 13. VALUE-STOCK/CYCLICAL ROTATIONS HAVE TAKEN PLACE SINCE 4Q20; WE EXPECT THIS TO CONTINUE INTO 1Q21
Constructi
Basic Infra, Trade
IDX30 IDX30 Consumer on, Misc.
Period Finance Industry & Utility, Services, Mining Agriculture
Value Growth Goods Property & Industries
Chemical Transport Investment
Real Estate
Jan-20 (6.2) 1.8 2.9 2.5 (3.6) (2.5) (0.4) (3.6) (4.7) (2.8) (6.9)
Feb-20 (1.7) (0.5) 3.1 (4.1) (6.3) (0.2) 1.1 3.5 2.8 (3.4) (5.0)
Mar-20 (11.5) (0.3) (4.0) 12.0 (6.8) 0.9 6.5 5.2 (4.0) (9.2) (3.0)
Apr-20 0.6 0.5 (8.1) 5.9 27.4 9.8 (3.1) (1.8) (17.3) (3.8) (0.7)
May-20 (1.4) (1.4) 0.8 (1.6) (2.9) (6.4) (0.8) 1.6 9.4 16.2 (0.1)
Jun-20 8.7 1.7 6.9 (3.5) (6.4) (1.0) (3.3) (4.3) (3.5) (2.2) 3.3
Jul-20 3.7 0.7 2.1 (0.3) (0.8) (2.6) (2.2) 7.0 (11.7) 1.3 7.6
Aug-20 4.9 0.2 2.7 0.8 (0.6) (6.9) (0.8) 0.4 (2.8) (2.7) 0.8
Sep-20 (1.2) (1.1) (5.2) 1.6 0.4 (1.2) 7.4 2.3 21.6 (3.1) 3.0
Oct-20 0.9 (0.3) 4.3 (6.6) 2.1 (2.4) (3.5) 1.2 (8.1) 11.5 0.2
Nov-20 5.6 1.0 1.0 (7.5) 3.8 7.4 (3.5) 8.6 3.1 (9.4) 0.3
Dec-20 5.5 (1.6) 0.7 (5.2) 3.5 (2.7) 2.1 3.5 0.4 1.8 (1.1)
Note: Figures represent relative month-to-month performance to JCI Index. Dec-20 data is up to 11-Dec-20
Source: Bloomberg
Mass vaccinations to begin in 2Q21. The announcement of the vaccine candidates’ late-
stage results lifted the market sentiment in November, fueling further rotations into
equities. Growth-sensitive sectors, such as cyclicals and value stocks, should continue to
benefit as the market rotates away from defensives and growth stocks. Two vaccines have
been approved for full use, five in early or limited use, and fifteen in phase three trials.
While the market has enthusiastically responded to these positive developments, the focus
will soon shift to distribution challenges. In Indonesia’s case, all eyes will be on the approval
timeline of certain vaccine producers with large volume commitments to Indonesia, such
as Sinovac and Novavax, and on the social acceptance rate, given the low immunization
rate here. Until mass vaccinations begin in 2Q21, risks would persist, as COVID-19 cases
may worsen, though the market could still look beyond this if further vaccine development
updates were proven solid. For this reason, we still keep some defensives in our portfolio,
while we expect a more backloaded earnings recovery in 2021.

The Indonesian government has provided the roadmap for COVID-19 vaccination, with
about 40% coverage for the entire population or nearing 70% of the 18–59-year-old age
group. This roadmap is nonetheless subject to further changes.
 Within the 18–59-year-old age group, a total of 239mn doses are planned for 107mn
people, representing around 67% of this age group or about 40% coverage of the entire
population. This appears low, considering that only <1% of Indonesians have
contracted COVID-19, though ~70% of the cases are arguably concentrated within just
11 provinces. Most vaccines are aimed for this age group, as Indonesians older than 60
years make up a smaller portion of the population, at 11%, and those younger than 18
years, about 22%. COVID-19 fatality rates for Indonesians within the age group of <45
years are nonetheless low.
 About 30% of the vaccines are given through a government program, while the
remaining 70% are voluntary vaccinations. The first 18mn doses (7.5% of total doses
planned) are allocated for priority workers (medical workers and public servants) and
will be distributed from Dec-20 until Mar-21. Public vaccinations to start in 2Q21: 57mn
doses in 2Q21 (23.8%), 82mn in 3Q21 (34.2%), and 82mn in 4Q21 (34.4%).
 The vaccine providers that Indonesia will procure from, such as Sinovac and Novavax,
have not published any interim results regarding their efficacy rates. The government
has approved a wider list of vaccines through the latest Ministry of Health regulation,
though supply negotiations have not concluded.
FIGURE 14. LATEST INDONESIA COVID-19 VACCINATION TIMELINE
Source: Mandiri Sekuritas, COVID-19 mitigation/economic recovery team, Ministry of Health

FIGURE 15. VACCINATION ROADMAP UNTIL REACHING 67% OF FIGURE 16. BREAKDOWN OF INDONESIA’S POPULATION BY AGE
THE 18–59-YEAR-OLD AGE GROUP GROUP
90 300%
Doses (m)
80
Cumulative % of total population (RHS)
250%
70 Cumulative % of 18-59 years age group (RHS)
33% of total
60 200%
50
150%
40
57% of total
30 100%
20
50%
10
0 0% 11% of total
Dec-20 Jan-21 Feb-21 Mar-21 2Q21 3Q21 4Q21
Source: BPS, Ministry of Health, Mandiri Sekuritas Source: BPS
FIGURE 17. PROVINCIAL SPREAD OF POPULATION VERSUS FIGURE 18. BREAKDOWN OF INDONESIA’S FATALITY RATES BY
COVID-19 CASES AGE GROUP
12.5% 12.0% 11.1%
10.0%
7.5%
8.0%
2.5%
6.0% 5.0%
Jakarta
Bali
Maluku
C. Sulawesi
W. Sulawesi
Gorontalo
E. Kalimantan
Lampung
Yogyakarta
Banten
C. Java
N Maluku
S. Kalimantan
Papua
W. Papua
Riau
Bengkulu
E. Nusa Tenggara
S. Sumatra
W. Java
Aceh
Jambi
N. Kalimantan
S. Sulawesi
N. Sumatra
W. Sumatra
N. Sulawesi
Riau Island
C. Kalimantan
W. Kalimantan
SE Sulawesi
Bangka, Belitung
W. Nusa Tenggara
E. Java
-2.5% 4.0%
National CFR at 3.1%
1.7%
-7.5% 2.0% 1.1% 0.7% 0.9%
0.0%
-12.5% 0-5 6-18 19-30 31-45 46-59 >60
Distribution of Active Cases Minus Distribution of Population Case Fatality Rates
Source: BNPB, CEIC, Mandiri Sekuritas Source: BNPB, Mandiri Sekuritas
Gradual activity normalization, with revenue run-rate normalizing in 4Q21 at the

earliest. Our economist expects the YoY GDP growth to recover to 2.5% in 1Q21 and 5.0-
5.1% in 2Q21-4Q21. In 3Q20, MANSEK universe’s revenue began recovering, up 9% QoQ
after 2 quarters of declines, though still 18% below the 3Q19 figure. Worsening COVID-19
cases of late may further disrupt activity recovery, but we expect the sentiment disruptions
to be short-lived, as vaccinations have started. The mobility trend has recovered since Jul-
20 but stalled at around 10-20% below normal.
As mass vaccinations occur in 2Q21, our base case sees the 50% capacity restriction
possibly removed by then, while the reopening of workplaces and schools would further
help the economic multiplier. We forecast a 14% revenue recovery in 2021 after a 13% fall
this year. We think the quarterly revenue run-rate should be closer to the 2019 figure
toward the later part of 2021. We expect 8% revenue growth in 2022.

FIGURE 19. INDONESIA’S 2021 REAL GDP GROWTH ESTIMATES: FIGURE 20. QUARTERLY EBIT AND EARNINGS GROWTH OF
RETURNING TO 5% LEVEL IN 2Q21 MANSEK UNIVERSE
6.0% 5.2% 5.1% 5.0% 5.0% 40%
5.0%
4.4% 30%
4.0%
3.0% 20%
2.5%
10%
2.0%
0%
0.0%
0.0% -10%
-20%
-2.0% -1.0%
-30%
-40%
-4.0% -3.5% -50%
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
-6.0% -5.3%
4Q19
1Q20
2Q20
3Q20
2020F
2021F
4Q20F
1Q21F
2Q21F
3Q21F
4Q21F
2019
EBIT, YoY Net Profit, YoY
Source: Mandiri Group Source: Company data, Mandiri Sekuritas
FIGURE 21. 7-DMA IN INDONESIA’S MOBILITY TREND ACROSS

FIGURE 22. 7-DMA IN INDONESIA’S MOBILITY TREND TO RETAIL
CATEGORIES OF PLACES
& RECREATION AREAS ACROSS PROVINCES
30 5.0
20
-
Special Region of…

10
Bali
South Sulawesi
Jakarta
West Java
Central Sulawesi
Riau Islands
West Papua
Maluku
East Java
Gorontalo
North Sumatra
Lampung
West Kalimantan
East Kalimantan
West Sumatra
Banten
Jambi
Papua
Riau
West Nusa Tenggara

Central Java
North Kalimantan
Bengkulu
Bangka Belitung Islands
South Sumatra
North Sulawesi
Aceh
North Maluku
Central Kalimantan
South Kalimantan
West Sulawesi
South East Sulawesi
East Nusa Tenggara
- (5.0)
18-Apr
19-Sep
8-Aug
3-Oct
7-Mar
2-May
22-Feb
4-Apr
13-Jun
27-Jun
11-Jul
25-Jul
5-Sep
22-Aug
17-Oct
31-Oct
21-Mar
16-May
30-May
14-Nov
(10)
(20) (10.0)
(30) (15.0)
(40)
(50) (20.0)
(60) Indonesia, 7DMA Mobility: Retail and Recretional Areas
(25.0)
(70)
Period: Average of 21-27 Nov 2020
Retail & Recreation Grocery & Pharma Parks (30.0)
Transit Stations Workplaces Residential (35.0)
Source: Google Mobility Trend Source: Google Mobility Trend
End to the pandemic is clearer, but near-term path could still be volatile. Without
delays, mass vaccinations will only take place in 2Q21, while risks remain if the efficacy
results on any of the Indonesian vaccine suppliers are disappointing, thus requiring a
higher number of vaccinated population, which could raise the challenges. Worsening
COVID-19 cases and fatalities, which have been happening lately, could derail near-term
sentiment, and thus economic recovery, with risks of a tightened restriction even though
we believe the government is clearly not in favor of a strict lockdown, given the economic
costs. There is light at the end of the tunnel, but that path could remain volatile. As such,
we still keep a portion of defensives to hedge our cyclical preference. Corrections would be
buying opportunities.

FIGURE 23. INDONESIA’S DAILY COVID-19 NEW CASES AND FIGURE 24. 7-DMA IN INFECTION RATES ACROSS INDONESIA,
FATALITIES ON A 7-DMA JAKARTA, AND INDONESIA EX-JAKARTA
6,000 160 25% 70%
140 60%
5,000
20%
120
50%
4,000
100 15%
40%
3,000 80
30%
60 10%
2,000
20%
40
5%
1,000 10%
20
- - 0% 0%
Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20
New Cases - 7DMA New Deaths - 7DMA (RHS) National Jakarta National Ex-Jakarta
Source: Ministry of Health Source: BNPB

Uneven Normalization with Post-Pandemic Industry Consolidation
Industry consolidations will take place this time. Since 2019, we have been advocating
that several companies operating in industries with weak profitability and below-WACC
returns will be forced to either drive costs efficiencies or consolidate, as has been occurring
in several sectors since that year. Prior to the pandemic, the JCI’s ROIC has already been
running within cost of fund, which got worse this year. The COVID-19 pandemic will fast
forward this consolidation, which will lead to an uneven recovery as the pandemic ends.
Companies with stronger balance sheets and bargaining power, given their market share
dominance, will have a better cushion to navigate the pandemic, likely consolidating more
market shares to their advantages as the pandemic ends. Extension of loan restructuring
scheme by another year to end-1Q22 should buy some companies—not all—more time.
Indonesia’s BPS survey in July further indicated that only 26% of the surveyed companies
thought they could survive for more than 3 months without assistance, and only 45% of
those that managed to diversify their business thought they could last for more than 3
months. Unreadiness in adopting technology and inflexibility of the supply chain are
additional challenges.
FIGURE 25. JCI INDEX’S ROIC AND ROE TREND – 12M TRAILING FIGURE 26. LOAN RESTRUCTURING TREND
14%
(Rp tn) (%)
13%
1,000 18.0
12% 900 16.0
800 14.0
11%
700 12.0
10% 600 10.0
500
9%
400 8.0
8% 300 6.0
200 4.0
7% 2.0
100
6% - -
1-Apr-20
18-May-20
26-May-20
8-Jun-20
11-Jun-20
22-Jun-20
29-Jun-20
7-Jul-20
10-Aug-20
7-Sep-20
20-Jul-20
5%
4%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
Market ROIC - LTM Market ROE - LTM Total loans (Rp tn) % of restructured loans
Source: Factset Source: OJK
FIGURE 27. INDONESIA’S LATEST COVID-19 VACCINATION TIMELINE

JCI DuPont Model Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 LTM
Profit Margin (%) 13.3 12.6 12.5 11.2 11.5 10.5 11.5 13.1 13.7 10.2 7.4
Asset Turnover (x) 0.3 0.4 0.4 0.4 0.3 0.3 0.3 0.2 0.3 0.3 0.4
Financial Leverage (x) 3.8 3.6 3.7 3.7 3.8 3.6 3.5 5.3 3.5 3.4 3.6
RoE/DuPont Model 17.4 17.0 16.5 15.0 14.3 12.1 12.2 11.5 15.0 11.3 10.1
Bloomberg RoE 17.0 17.0 14.7 12.6 12.1 8.7 10.5 12.4 10.6 10.2 10.1
Adjusted RoE* 19.5 19.4 17.4 15.4 14.3 9.9 12.0 12.8 12.9 11.5 7.8
Source: Bloomberg, Mandiri Sekuritas
Consolidations will accelerate among the most affected sectors; winners could
recover stronger. According to the BPS survey, the three most affected sectors are hotels
& restaurants, other services, and transport & warehousing. In the table below, we updated
the ROE for each sector in the JCI Index, with the latest column being the last 12 months of
ROE. The latest ROE data clearly shows that the COVID-19 pandemic will force for more
consolidations among the highly competitive industries with fragmented competition,
digital disruption, and low pre-pandemic ROE. We think the odds are high for retailers,
restaurants, land transport, and building materials. We like MAPI, MAPA, BIRD, SMGR, and
INTP. Telecom could be one too.

FIGURE 28. SECTORAL ROE TREND

ROE* Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 LTM
Airlines 14.9 6.6 9.7 0.8 (40.2) 7.8 0.8 (22.8) (35.4) 1.0 (174.9)
Auto Components 19.5 11.6 12.5 1.5 2.8 (6.6) 5.2 (0.6) (9.7) 1.2 0.2
Automobiles 24.5 23.5 21.6 18.0 15.7 11.2 10.7 11.9 13.8 11.4 10.3
Banks 20.0 20.1 20.2 20.0 17.7 15.3 12.8 13.7 14.0 13.1 10.0
Beverages 94.0 95.7 - 98.4 143.5 64.8 119.6 124.1 104.9 105.2 52.4
Cement 24.3 22.9 24.0 20.8 19.5 15.0 12.3 5.0 5.3 7.1 7.1
Chemicals 4.3 9.5 6.3 5.1 4.5 4.6 2.7 4.3 8.1 8.3 7.6
Construction & EPC 16.5 18.7 21.2 21.1 16.5 11.4 8.8 13.5 10.9 6.7 (1.4)
Construction Materials 20.9 19.2 18.7 17.7 19.8 12.1 8.6 7.0 7.7 3.4 (6.2)
Consumer Staples 21.3 20.0 20.4 17.9 20.1 17.8 20.5 13.9 22.5 21.6 21.9
Energy 17.3 21.2 10.4 3.6 4.2 (15.5) 7.6 16.0 14.5 10.4 4.1
Gas Utilities 41.3 34.8 36.8 26.9 23.6 12.8 9.4 4.5 9.3 2.1 (0.3)
Healthcare 49.0 67.0 21.5 13.3 17.2 12.7 11.5 7.5 5.8 3.6 2.7
Media 11.4 14.1 15.9 12.1 12.4 6.8 10.1 9.8 11.1 12.1 10.6
Pharmaceuticals 20.7 21.3 22.0 21.1 20.2 17.4 17.4 16.6 15.2 10.3 10.8
Plantation 16.9 17.8 10.2 2.7 9.5 3.2 5.7 4.0 (0.2) (10.7) (9.4)
Poultry 40.7 30.6 29.2 21.0 11.6 11.0 17.8 13.4 22.2 16.0 12.2
Property & Ind. Estate 5.8 7.9 9.8 15.0 15.4 8.3 7.2 8.6 7.9 4.0 0.5
Pulp & Paper 2.2 1.8 2.3 6.0 4.3 6.1 5.5 10.3 16.4 8.1 9.4
Retail 61.0 17.9 21.7 23.8 20.5 17.1 18.3 11.9 13.9 15.9 3.1
Telecommunication 16.4 14.1 12.8 9.9 8.6 6.7 15.8 17.9 9.3 15.6 16.9
Textiles 20.3 12.5 13.2 11.8 13.3 12.8 13.0 11.3 13.2 12.8 14.0
Tobacco 32.0 35.9 32.6 31.7 29.4 22.7 20.9 23.4 23.3 25.9 20.2
Toll Road 14.3 14.3 16.4 12.3 12.9 11.9 11.6 12.0 10.9 9.5 3.7
Trading 10.9 62.9 15.4 12.1 13.6 14.2 12.5 13.3 7.2 7.1 8.1
Trading & Distribution 33.8 37.3 28.7 9.7 7.8 3.4 12.6 14.7 22.4 18.8 13.3
Transportation 25.0 9.9 11.4 41.9 19.0 16.3 6.0 (1.3) (8.1) 0.8 1.1
Overall 19.5 19.4 17.4 15.4 14.3 9.9 12.0 12.8 12.9 11.5 7.8
Note: Universe represents stocks in JCI Index with at least one sell-side coverage. Source: Bloomberg, Mandiri Sekuritas
Two-speed economy, favoring mid-upper. With abundant liquidity, both the equity and
bond markets have appreciated, while the real economic recovery has somewhat been K-
shaped as the economy runs in two speeds. We think mid-upper consumers will recover
faster, with strong discretionary pent-up demand post vaccination, whereas the middle-
low and low-income segments will take longer to recover. We see upside risks that certain
pent-up demand exceed supply in certain discretionary products; some mid-upper
segment hotels have already reported decent occupancy rates as well as some restaurants,
even though vaccines have not been deployed and COVID-19 cases continued to worsen.
Our biggest concern is the lasting impact from the pandemic on employment, as industry
consolidations will occur, cost optimization will continue, and tech adoption will be
necessary. That said, while we favor Consumer Discretionary, we restrict our preferences on
the mid-upper segments: Property, Automotive, and mid-upper Retailers (MAPI, MAPA,
ACES). Domestic tourism spending has a huge pent-up demand due to both downtrading
and avoidance of overseas travel. We think the most appropriate proxies are JSMR (as land
commute should be preferred, given that people would perceive it as safer than air
transport, while it should benefit from tourism downtrading), BIRD, and PZZA.

FIGURE 29. DOMESTIC 4W RETAIL SALES VOLUME RECOVERY FIGURE 30. PROPERTY PRE-SALES TREND (AGGREGATE OF ASRI,
HAS BEEN GRADUAL BSDE, CTRA, PWON, SMRA, AND JRPT)
90.0 0% 8,000
80.0 -10% 7,000
70.0 -20%
6,000
60.0 -30%
5,000
50.0 -40%
4,000
40.0 -50%
30.0 -60% 3,000
20.0 -70% 2,000

10.0 -80% 1,000
- -90% -
Mar-20
Apr-20
Aug-20
Oct-20
Sep-20
Jan-20
Jun-20
Feb-20
May-20
Jul-20
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20F
4W Retail Sales ('000 cars) Growth, YoY (RHS) Property Pre-Sales (Rp bn)
Source: Gaikindo Source: Company, Mandiri Sekuritas estimates
FIGURE 31. DOMESTIC CEMENT SALES VOLUME IN 3Q20 HAS FIGURE 32. RETAILERS’ SSSG REMAINS WEAK UP TO 3Q20,
SURPASSED THE PRE-PANDEMIC LEVEL PARTICULARLY DEPARTMENT STORES
8,000 40.0%
20.0%
7,000 30.0%
20.0% 0.0%
6,000
10.0% -20.0%
5,000
0.0%
4,000 -40.0%
-10.0%
3,000
-20.0% -60.0%
2,000 -30.0%
-80.0%
1,000 -40.0%
- -50.0% -100.0%
Mar-19
Mar-20
Apr-19
Aug-19
Oct-19
Sep-19
Dec-19
Apr-20
Aug-20
Sep-20
Jan-19
Nov-19
Jan-20
Jun-19
Feb-19
May-19
Jul-19
Feb-20
May-20
Jun-20
Jul-20
4Q19
1Q20
2Q20
3Q20
LPPF MAPI MAPA ACES RALS
Domestic Cement Volume ('000 tons) Growth, YoY (RHS)
Source: Gaikindo Source: Company

Excessive Liquidity Supporting 2021-22 Growth
Diminishing COVID-19 fears will propel confidence to spend. Should the vaccination
program and medical treatment improvement manage to reduce COVID-19 cases and
fatalities in 2Q21, we expect a much more effective multiplier and transmission of fiscal and
monetary policies into the economy, with businesses and consumers starting to utilize the
excess liquidity in the banking system as confidence returns. Liquidity in the domestic
banking system has been excessive, with LDR at its 8-year low and loan-growth-to-money-
supply-growth at the lowest since the Asian Financial Crisis; on the other hand, banks have
built up sensible loan provisioning. Bank Indonesia’s open market operations (OMO) have
also doubled compared to last year. With the fiscal deficit budgeted at 5.7% next year, we
expect domestic liquidity to remain ample along with accommodative monetary policies
and tailwind from strong commodity prices.
FIGURE 33. INCREASE IN DAILY COVID-19 CASES AFFECTED FIGURE 34. CHANGES IN THE HOUSEHOLD FINANCIAL
CONSUMER CONFIDENCE ALLOCATION ON SPENDING, SAVINGS, AND LOAN REPAYMENT
130 4,500 12.0%
9.7%
4,000 10.0%
120 Changes compared
8.0% 6.5%
3,500 to March 2020
110 6.0%
3,000 3.8%
4.0%
100 2,500 2.0% 0.6%
90 2,000 0.0%
-2.0% -0.3% -0.8%
1,500
80 -4.0% -2.3%
1,000
-6.0%
70
500 -8.0%
-7.3%
60 - -10.0% -8.1%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Consumption Debt Repayment Saving
Consumer Confidence Index Average Daily New Cases Aug-20 Sep-20 Oct-20
Source: Bank Indonesia, Ministry of Health Source: Bank Indonesia
FIGURE 35. BANKING SYSTEM’S LDR AT 8-YEAR LOW FIGURE 36. OPEN MARKET OPERATIONS EXCEED RP700TRN
35% 100% 800 Bank Indonesia Certificates
83% Sep-20 LDR returned 83% Open Market Bank Indonesia Deposit Certificates
30% to mid-2020 level 95%
Operations Term Deposit
Govt. Bond Reverse Repo
25% 600 (OMO) (in Rp trn) Repo
90%
Sharia BI Certificate
20%
85%
15%
400
80%
10%
5% 75%
200
0% 70%
Mar-10
Aug-09
Oct-10
Mar-17
Dec-11
Oct-17
Sep-13
Apr-14
Aug-16
Dec-18
Sep-20
Jan-09
Nov-14
Jan-16
May-11
Jul-12
Jun-15
Feb-13
May-18
Jul-19
Feb-20
-
Mar-17
Mar-18
Mar-19
Mar-20
Sep-17
Sep-18
Sep-19
Sep-20
Jan-17
Nov-17
Jan-18
Nov-18
Jan-19
Nov-19
Jan-20
May-17
Jul-17
May-18
Jul-18
May-19
Jul-19
May-20
Jul-20
Loan, YoY Deposit, YoY LDR (RHS)
Source: Bank Indonesia, OJK Source: Bank Indonesia
Credit cycle resumption could take place in 2H21, albeit gradually. The Financial
Services Authority (OJK) targets 1-4% industry loan growth in 2021, while Bank Indonesia
projects a higher 7-9% growth in both loan and third-party funds. These are compared to
the 1-2% loan growth probably achieved this year. Up to September, the industry loan
growth was still -1.5% YTD, slightly better than the -1.7% YTD in August. Some
improvements occurred in construction, agriculture-hunting-and-forestry, and mortgage
loans on the consumer side, albeit slowly. Regardless, property developers have recorded
strong property presales recovery, while the 2021 state budget and the omnibus law
implementation (i.e., SWF) appear to be constructive for infrastructures, we think.

Accommodative fiscal and monetary policies, along with improving economic activities,
will eventually resume the credit cycle expansion, though we expect a more pronounced
recovery in 2H21 as mass vaccinations take place. Third-party funds continued to grow
soundly along with weak CAPEX cycle and consumption appetite, but it is plausible that
the sentiment could swiftly turn as the pandemic’s end is in sight.
Globally, the yield curve has been steepening as expectations on economic recovery build
up. While near-term inflationary risks are low, inflationary expectations should rise within
the medium-term, limiting room for further rate cuts. We expect accelerating loan demand
in 2H21, gradually resuming the credit cycle with excessive liquidity conditions. Not only
that the LDR is at an 8-year low, but the loan-growth-to-M2-growth ratio is the lowest since
the 1998 Asian Financial Crisis. Strong commodity prices are an additional tailwind. As
global monetary policies will remain accommodative, we do not expect material pressure
on interest rate reversal. We favor Banks, while pent-up demand benefits Consumer
Discretionary.
FIGURE 37. LOAN GROWTH BREAKDOWNS BY INDUSTRY

YTD loan growth by sectors (%) Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Corporate
Agricultures, Hunting and Forestry 3.6 2.6 1.9 2.2 1.4 2.4 4.4
Fishery 2.7 3.3 (1.2) 1.1 4.2 6.5 8.7
Mining and Quarrying 11.7 6.3 9.8 9.5 13.2 16.2 11.0
Procesing Industry 3.2 (0.1) 0.2 (2.0) (1.6) (2.3) (1.7)
Electricity, Gas and Water 8.5 6.7 7.5 7.4 2.6 (0.6) (3.0)
Construction (2.5) (2.2) (0.5) 0.4 0.8 0.9 2.4
Wholesale and Retail Trade (0.7) (3.4) (4.5) (5.8) (6.6) (6.8) (6.5)
Provision of accommodation, eating and drinking 3.1 2.1 2.7 2.1 3.5 4.7 6.0
Transportation, Warehousing, Communications 2.5 0.6 1.2 3.5 4.6 3.7 4.7
Financial intermediaries 5.6 4.7 1.4 (3.4) (4.9) (7.5) (11.9)
Real Estate, Business, Ownership, Business Services 1.1 (0.2) (1.1) (2.1) (1.8) (2.2) (1.7)
Government administration, Defense, Compulsory social security 10.9 2.2 2.6 2.5 9.2 9.9 2.8
Education Services (2.7) (2.9) (2.5) (1.8) (1.9) (2.1) (5.7)
Health Services and Social Activities (13.4) (13.5) (13.8) (13.7) (15.2) (14.0) (14.0)
Community, Sociocultural, Entertainment, Other Individual Services 1.8 (0.5) (0.6) 1.5 3.0 2.5 1.2
Consumer
For Home Ownership 0.5 0.4 0.4 0.4 1.0 1.5 1.1
For Apartment Ownership 1.2 1.0 0.5 (0.2) 0.3 0.6 0.5
For Shop House Ownership (2.3) (3.5) (4.5) (6.0) (6.6) (7.2) (7.8)
For Vehicles Ownership 1.9 (1.0) (5.0) (8.8) (11.5) (14.7) (18.1)
Total 1.7 (0.1) (0.6) (1.2) (1.4) (1.7) (1.5)
Source: OJK
FIGURE 38. INDUSTRY LOAN GROWTH VS. M2 GROWTH: LOWER FIGURE 39. JCI’S CAPEX CYCLE SHARPLY DROPPED IN 1Q20
THAN 2008 GFC, THE LOWEST SINCE 1998 AFC WITH NO MEANINGFUL RECOVERY IN 3Q20
35% 2.5 10.0% 40%
9.5%
30% 30%
2.0 9.0%
25% 8.5% 20%
20% 1.5 8.0% 10%
7.5%
15% 1.0 0%
7.0%
10% 6.5% -10%
0.5
5% 6.0%
-20%
5.5%
0% -
5.0% -30%
Mar-10
Aug-09
Oct-10
Mar-17
Dec-11
Sep-13
Apr-14
Aug-16
Oct-17
Dec-18
Sep-20
Jan-09
Nov-14
Jan-16
May-11
Jul-12
Jun-15
Feb-13
May-18
Jul-19
Feb-20
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
Loan, YoY M2, YoY Loan Growth/M2 Growth (x) (RHS) Capex/Sales 12M Trailing CAPEX, YoY (RHS)
Source: Bank Indonesia, OJK, Mandiri Sekuritas Source: Bloomberg

Business sentiment rebounded strongly but still far from normal. Bank Indonesia’s
latest business confidence survey shows improving sentiment, with a 3Q20 net weighted
balance of -6.0, returning to the 1Q20 level after the steep drop to -35.8 in 2Q20. Inventory
restocking likely helped the manufacturers, with utilized production capacity recovering to
72% in 3Q20 from 69%/74% in 2Q20/1Q20 (2019 average at 76%). Survey participants
shared an optimistic view for 4Q20, with a net weighted balance of 2.2 on the business
confidence survey, whereas the net weighted balance for investment realization picked up
to -1.3 in 3Q20 from 2.6 in 1Q20 and -13.1 in 2Q20, with the forward-looking expectation
coming in at 2.0 for 4Q20. Global PMI recovery has been happening, with the US and North
Asia ex-Japan reaching 53-57 in November, while Indonesia’s PMI reached 50.6.
FIGURE 40. BUSINESS CONFIDENCE SURVEY AND CAPACITY FIGURE 41. SURVEY ON REALIZATION OF INVESTMENTS
UTILIZATION RATES HAVE BOTTOMED IN 2Q20 REBOUNDED IN 3Q20
30 82 15
80
20 10
78
10
76 5
0 74
0
(10) 72
70 -5
(20)
68 -10
(30)
66
-15
(40) 64
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20F
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
2Q20
4Q20F
Business Confidence (% Weighted Net Balance) Capacity Utilization (%) (RHS) Realization of Investments (% Weighted Net Balance)
Source: Bank Indonesia Source: Bank Indonesia
FIGURE 42. PMI TREND ACROSS SEVERAL KEY COUNTRIES HAVE RETURNED TO <50
60.0 US, 56.7
Taiwan, 56.9
India, 56.3
55.0 China (Caixin), 54.9
S. Korea, 52.9
50.0 Indonesia, 50.6
Thailand, 50.4
45.0
Japan (Jibun), 49.0
40.0
35.0
30.0
25.0
Feb-20
Jan-20
Apr-20
Jun-20
Dec-19
Mar-20
Sep-20
May-20
Jul-20
Aug-20
Nov-20
Oct-20
Source: Bloomberg

Pursuit of Yield and Weak Dollar Favoring Indonesia
Negative-yielding bonds broke another record high. Globally low interest-rate

environment should remain in 2021, while the Fed has committed to allowing inflation to
overshoot its 2% target and keeping rates unchanged until at least 2023. Negative-yielding
bonds have indeed reached a record-high this year, hitting USD 17tn in Nov-20, surpassing
the previous peak in Aug-19. Similarly, last month, China issued its first negative interest
rate debt, attracting EUR 16bn in orders for the EUR 4bn bond offering priced at -0.152%
yield on the 5Y and <1% yields on the 10Y and 15Y. Global debt-to-GDP will reach a new
historical-high this year, exceeding the post-World War II level. During the post-war period,
the debt was paid with strong GDP growth, high inflation, and financial repression. That
said, globally low-yield environment with tolerance for inflation overshooting may happen.
FIGURE 43. NEGATIVE-YIELDING BONDS BROKE A NEW RECORD-HIGH IN FIGURE 44. 2020 GLOBAL DEBT-TO-GDP (%) LOOKS SET TO EXCEED
NOV-20 POST-WORLD WAR II
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
Nov-10
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
Global Aggregate Negative-Yielding Debt (USD bn)
Source: Bloomberg Source: IMF
Yield seekers will look at riskier assets and EM. Investors will enter 2021 with asset
classes in the developed markets, such as the US bond and equity markets, trading at
enormously expensive levels. As 2021 will be a year of global economic recovery, we think
the pursuit of yield will continue to trigger further rotations into riskier assets (i.e., equities
over money markets and bonds) and EM over DM. While global policymakers should
remain accommodative, a repeat of 2020 in terms of the delta of monetary policy easing
appears unlikely. We expect no cut in Bank Indonesia’s reference rate next year compared
to the 125 bps easing this year. As such, capital gains on government bonds should be
smaller in 2021, not just here, but globally. Vaccine deployment is key, along with the result
of Georgia’s runoff election on 5-Jan that could still lead to a Blue Wave scenario.
FIGURE 45. JCI INDEX ENTERS 2021 WITH A STEEP FORWARD PE FIGURE 46. SPREAD BETWEEN INDO AND US GOVERNMENT BONDS IS
DISCOUNT TO US S&P 500 INDEX NONETHELESS SIMILAR TO LT AVERAGE
15% 8%
10% 7%
5% 6%
0%
5%
-5%
4%
-10%
3%
-15%
-20% 2%
-25% 1%
-30% 0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
JCI's Year-End Fwd PE Premium/(Disc) to US S&P500 2009-19 Avg. Year-End Indo 10Y Minus UST10Y 2009-19 Avg.
Source: Bloomberg Source: Bloomberg

Indonesia’s government bonds can still benefit, given their high real yield. Inflows into the
bond market should help cushion expectations for a higher CAD next year, as our base case
assumes backloaded FDI inflows post-omnibus law. Indonesia’s equity market should
benefit too, given the relative valuation gap and widening earnings yield spread over the
risk-free rates, giving scope for further normalization in equity risk premium, though
returning to the 2019 level requires stronger conviction on earning recovery, which would
only become clearer in mid-2021. The path could still be volatile, as mass vaccinations are
still months away, yet the implied risk premium has not returned to its long-term average.
FIGURE 47. FORWARD PE MULTIPLES ACROSS SOME EQUITY INDICES FIGURE 48. 10Y GOVERNMENT BOND YIELDS ACROSS SELECTED
GLOBALLY COUNTRIES GLOBALLY
24.0 9.0
22.0 8.0
20.0 7.0
18.0 6.0
16.0 5.0
14.0 4.0
12.0 3.0
10.0 2.0
8.0 1.0
6.0 0.0
Mar-19
Apr-19
Mar-19
Aug-19
Oct-19
Mar-20
Sep-19
Dec-19
Apr-20
Aug-20
Oct-20
Sep-20
Dec-20
Apr-19
Aug-19
Oct-19
Mar-20
Sep-19
Dec-19
Apr-20
Aug-20
Oct-20
Sep-20
Dec-20
Jan-19
Nov-19
Jan-20
Nov-20
Jan-19
Nov-19
Jan-20
Nov-20
Feb-19
May-19
Jun-19
Jul-19
Feb-20
May-20
Jun-20
Jul-20
Jun-19
Jun-20
Feb-19
May-19
Jul-19
Feb-20
May-20
Jul-20
JCI Index US S&P500 HK HangSeng China CSI300
Indo US HK China Thai India PH
Thai SET India Phil PCOMP
FIGURE 49. JCI’S EARNINGS YIELD SPREAD TO INDO GOVERNMENT FIGURE 50. JCI’S IMPLIED EQUITY RISK PREMIUM HAS DECLINED BUT IS
BOND’S 10Y YIELD STILL ABOVE THE 2019 LEVEL
6.0 6.0
5.0 10Y Bond Yield and Equity 5.0
4.0 Earnings Yield Spread
3.0 4.0
2.0
3.0
1.0 10Y Mean
- 2.0
(1.0)
1.0
(2.0)
(3.0) -
Mar-11
Dec-07
Oct-08
Oct-12
Mar-15
Aug-13
Sep-17
Apr-19
Dec-20
Mar-14
Mar-18
Dec-10
Oct-11
Dec-14
Oct-15
Aug-16
Aug-20
Jan-12
Jan-16
Nov-16
Jul-09
May-10
Jun-14
Jun-18
Jan-19
Feb-20
Nov-19
Jul-12
May-13
Jun-17
10Y Bond Yield Minus Equity Earnings Yield 10Y Mean Implied ERP 10Y Mean
Yield curve could remain steep in 2021. Yield curves in the US have been steepening in
the past months, which typically will support the cyclicals. Recovering global economy
along with rising inflationary expectations could further steepen the US yield curve, as the
longer-tenor bond yield rises faster than the shorter ones’. One caveat, however, is the
potential yield curve control to limit the longer-end tenor appreciation, though we still
think Indonesia’s yield could steepen next year. Domestically, the steep yield curve has
recently flattened, as demand on the longer tenor has risen along with the return of foreign
buyers. In 2021, however, chances are high for a further yield curve steepening, as we do
not expect further rate cuts, while the government bond supply will likely be larger on the
longer tenors to reduce medium-term refinancing risks. Meanwhile, as BI can continue its
burden-sharing in the absence of smaller domestic and foreign bidders, domestic liquidity
could stay flush next year. Banks remain among our cyclical picks.

FIGURE 51. US AND INDO GOVERNMENT BOND YIELD CURVES FIGURE 52. US AND INDO GOVERNMENT BOND 10Y SPREADS
3.5 16.0
3.0 14.0
2.5 12.0
2.0 10.0
1.5 8.0
1.0 6.0
0.5 4.0
- 2.0
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
(0.5)
US 10Y - 2Y (%) Indo 10Y - 2Y (%) Indo 10Y Minus UST 10Y
Renewed dollar weakness in 2021. This could help offset IDR pressures, as imports would
rise along with the economic recovery, while the structural reforms’ impact on FDI and CAD
would be gradual. Odds for renewed US dollar weakness are high considering the global
economic recovery would weaken the US dollar as a haven asset, the real interest rate
spread makes it less attractive, and large fiscal deficits may likely continue with the drastic
fall in the US net national savings rate to -0.5% in 3Q20 causing more needs for external
funding/capital. High yield bonds, such as Indonesia’s, could benefit, which is why our
bond strategist, Handy Yunianto, expects the 10Y yield to settle at 5.75-6.00% by end-2021.
FIGURE 53. US NET NATIONAL SAVINGS RATE AS % OF NATIONAL FIGURE 54. CONSENSUS FORECAST REVISION TREND ON 2021 VALUE
INCOME VS. DXY CURRENCY FOR USD/IDR AND DXY CURRENCIES
25% 105 15,300 95
15,100
20% 100 94
14,900
15% 93
95 14,700
10% 14,500 92
90
14,300 91
5%
85 14,100
90
0% 13,900
2Q07
1Q08
4Q08
3Q09
2Q10
1Q11
4Q11
3Q12
2Q13
1Q14
4Q14
3Q15
2Q16
1Q17
4Q17
3Q18
2Q19
1Q20
4Q20
80 89
-5% 13,700
13,500 88
-10% 75
Mar-20
Mar-20
Apr-20
Aug-20
Oct-20
Sep-20
Sep-20
Dec-20
Jan-20
Jan-20
Nov-20
Feb-20
May-20
May-20
Jun-20
Jul-20
Jul-20
-15% 70
US Net Saving % of GDP DXY (RHS) 2021 USD/IDR Forecast (Rp/USD) 2021 DXY Forecast (RHS)
Source: Bloomberg, CEIC Source: Bloomberg
US dollar appreciated against the rupiah from the start of 2020 until end-March and has
since depreciated by 15.1%. Bloomberg consensus calls for 5.3% depreciation in DXY in
2021 and 5.8% in 2022. Our economist expects USD/IDR of Rp14,177 in end-2021
compared to Rp14,296 in end-2020. While the normalization of imports would swing
Indonesia’s current account back into a deficit next year, key factors to watch would be the
portfolio and FDI inflows. Strong commodity prices would be a positive tailwind as we
enter 2021, though we do not expect them to remain elevated beyond 2Q21.

FIGURE 55. INDONESIAN RUPIAH APPRECIATED IN 2H20 ON WEAKER FIGURE 56. INDONESIA’S BALANCE OF PAYMENT TREND AS % OF GDP
DXY AND FALL IN IMPORTS
16,000 105 6.0%
15,000 5.0%
100
4.0%
14,000
95 3.0%
13,000
90 2.0%
12,000 1.0%
85
11,000 0.0%
80 -1.0%
10,000
-2.0%
9,000 75
-3.0%
8,000 70 -4.0%
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
3Q14
2Q15
1Q16
4Q16
3Q17
2Q18
1Q19
4Q19
3Q20
9M20
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
USD/IDR DXY BoP % of GDP Current account % of GDP Financial account % of GDP
Source: Bloomberg Source: Bank Indonesia
FIGURE 57. KEY MACRO VARIABLE ESTIMATES FOR INDONESIA

Economic Variables 2017 2018 2019 2020F 2021F
Base Scenario I Scenario II
Real GDP, YoY 5.1 5.2 5.0 (1.0) (1.8) (2.2) 4.0-4.40
Current Account (% of GDP) (1.6) (2.9) (2.7) (1.5) (1.4) (1.3) -2.2 to -2.5
Rp/USD (Year-End) 13,548.0 14,390.0 13,866.0 14,296 14,177
BI 7D RRR (%) 4.25 6.00 5.00 3.75 3.75
Inflation, YoY (%) 3.6 3.1 2.7 2.0 1.4-2.0 3.0-3.5
Fiscal Deficit (% of GDP) (2.5) (1.8) (2.2) (6.1) -5.2 to -5.7
Source: Bloomberg, Mandiri Sekuritas Economic Research

Strong Commodity Tailwinds
Expansionary global growth. Although there have been supply disruptions across some
commodities due to the COVID-19 pandemic, long years of underinvestment in commodity
CAPEX cycle, and adverse weather, the global economic recovery is underway, driven by
hopes on vaccines and tailwind from the historically most aggressive fiscal and monetary
policy stimulus. Consensus aims for the G20 economic growth to recover to 4.4%/3.9% in
2021/2022, from negative 3.4% this year, among the fastest growth trajectory seen since
post-GFC period. The 2021/2022 economic growths in the US and China are estimated at
3.8%/3.0% and 8.2%/5.5%. Global manufacturing data has gradually been recovering, with
most key countries hitting expansionary thresholds (>50) since 3Q20, while Indonesia
bounced back to 50.6 in Nov-20 after declining to <50 in Sep/Oct. The latest PMIs in the US
and China were already higher than their pre-pandemic levels too.
FIGURE 58. GLOBAL ECONOMIC GROWTH ESTIMATES IN 2020-22F

Country 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F
G-20 3.6 2.9 2.9 3.1 3.3 2.7 3.5 3.4 2.7 (3.4) 4.4 3.9
Argentina 6.0 (1.0) 2.4 (2.5) 2.7 (2.1) 2.8 (2.6) (2.1) (11.6) 4.5 2.5
Australia 2.8 3.8 2.2 2.6 2.4 2.7 2.4 2.9 2.0 (3.5) 3.2 3.4
Brazil 4.0 1.9 3.0 0.5 (3.5) (3.3) 1.3 1.8 1.4 (4.7) 3.5 2.5
Canada 3.1 1.8 2.3 2.9 0.7 1.0 3.0 2.4 1.9 (5.6) 4.5 3.3
China 9.5 7.9 7.8 7.4 7.0 6.8 6.9 6.7 6.1 2.0 8.2 5.5
Germany 3.7 0.4 0.4 2.2 1.5 2.2 2.6 1.3 0.6 (5.6) 4.0 3.3
France 2.2 0.3 0.6 1.0 1.1 1.1 2.3 1.8 1.5 (9.3) 6.1 3.8
United Kingdom 1.3 1.4 2.2 2.9 2.4 1.7 1.8 1.2 1.3 (11.2) 5.4 4.5
Indonesia 6.2 6.0 5.6 5.0 4.9 5.0 5.1 5.2 5.0 (2.0) 5.1 5.1
India 8.5 5.2 5.5 6.4 7.4 8.0 8.3 7.0 6.1 4.2 (9.0) 9.0
Italy 0.6 (3.0) (1.8) 0.0 0.8 1.3 1.7 0.9 0.3 (9.0) 5.5 3.1
Japan (0.1) 1.6 2.0 0.3 1.6 0.8 1.7 0.6 0.3 (5.3) 2.6 1.8
South Korea 3.7 2.4 3.2 3.2 2.8 3.0 3.2 2.9 2.0 (2.7) 3.2 2.7
Mexico 3.7 3.6 1.4 2.9 3.3 2.6 2.1 2.2 (0.3) (9.1) 3.5 2.4
Russia 4.3 3.7 1.8 0.7 (2.0) 0.2 1.8 2.5 1.3 (3.9) 3.0 2.4
Saudi Arabia 10.0 5.4 2.7 3.7 4.1 1.7 (0.7) 2.4 0.3 (4.8) 3.1 2.8
Turkey 11.0 4.8 8.7 4.9 6.0 3.3 7.5 3.1 1.0 (2.0) 4.1 4.1
US 1.6 2.2 1.8 2.5 3.1 1.7 2.3 3.0 2.2 (3.6) 3.8 3.0
South Africa 3.3 2.2 2.5 1.9 1.2 0.4 1.4 0.8 0.1 (8.1) 3.6 2.0
Source: Bloomberg
FIGURE 59. GLOBAL PMI DATA

Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov-
Country PMI
19 20 20 20 20 20 20 20 20 20 20 20
JPMorgan Global Manufacturing PMI SA 50.1 50.3 47.1 47.3 39.6 42.4 47.9 50.6 51.8 52.4 53 53.7
Markit US Manufacturing PMI SA 52.4 51.9 50.7 48.5 36.1 39.8 49.8 50.9 53.1 53.2 53.4 56.7
Markit Eurozone Manufacturing PMI SA 46.3 47.9 49.2 44.5 33.4 39.4 47.4 51.8 51.7 53.7 54.8 53.8
China Manufacturing PMI SA 50.2 50.0 35.7 52.0 50.8 50.6 50.9 51.1 51.0 51.5 51.4 52.1
Caixin China Manufacturing PMI SA 51.5 51.1 40.3 50.1 49.4 50.7 51.2 52.8 53.1 53.0 53.6 54.9
Jibun Bank Japan Manufacturing PMI SA 48.4 48.8 47.8 44.8 41.9 38.4 40.1 45.2 47.2 47.7 48.7 49.0
Markit/BME Germany Manufacturing PMI SA 43.7 45.3 48.0 45.4 34.5 36.6 45.2 51.0 52.2 56.4 58.2 57.8
Markit/CIPS UK Manufacturing PMI SA 47.5 50.0 51.7 47.8 32.6 40.7 50.1 53.3 55.2 54.1 53.7 55.6
Markit France Manufacturing PMI SA 50.4 51.1 49.8 43.2 31.5 40.6 52.3 52.4 49.8 51.2 51.3 49.6
Markit India Manufacturing PMI SA 52.7 55.3 54.5 51.8 27.4 30.8 47.2 46.0 52.0 56.8 58.9 56.3
Markit Brazil Manufacturing PMI SA 50.2 51.0 52.3 48.4 36.0 38.3 51.6 58.2 64.7 64.9 66.7 64.0
Markit South Korea Manufacturing PMI SA 50.1 49.8 48.7 44.2 41.6 41.3 43.4 46.9 48.5 49.8 51.2 52.9
Commonwealth Bank Australia
49.2 49.6 50.2 49.7 44.1 44.0 51.2 54.0 53.6 55.4 54.2 55.8
Manufacturing PMI SA
Markit Indonesia Manufacturing PMI SA 49.5 49.3 51.9 45.3 27.5 28.6 39.1 46.9 50.8 47.2 47.8 50.6
Markit Taiwan Manufacturing PMI SA 50.8 51.8 49.9 50.4 42.2 41.9 46.2 50.6 52.2 55.2 55.1 56.9
Source: Bloomberg

Commodity rallies provide near-term support entering 2021. Supply constraints,

excessive global liquidity, and demand recovery should provide some support to
commodity prices. Prices of palm oil, nickel, rubber, and copper have exceeded pre-
pandemic levels, supported by a mix of demand recovery post-reopening, aggressive
global fiscal & monetary support, and somewhat tight supply in some commodities due to
structural underinvestment and adverse weather conditions. Another key commodity for
Indonesia, i.e., coal, has also recovered strongly since Sep-20 though still slightly below its
pre-pandemic level.
FIGURE 60. KEY COMMODITY PRICES IN USD TERMS (2018 = 100)
160
CPO
140
Gold
Nickel
120
Rubber
100
Copper
Oil (Brent)
80
60
40 Coal
20
May-18
May-19
May-20
Nov-18
Nov-19
Nov-20
Jan-18
Sep-18
Jan-19
Sep-19
Jan-20
Sep-20
Jul-18
Jul-19
Jul-20
Mar-18
Mar-19
Mar-20
Source: Bloomberg, Mandiri Sekuritas
FIGURE 61. KEY COMMODITY PRICE ESTIMATES

4Q19 1Q20 2Q20 3Q20 4Q20 1Q21F 2Q21F 3Q21F 4Q21F 2019 2020 2021F
Brent Crude Oil (USD/BBL) 62.4 50.8 33.4 43.3 43.9 45.5 48.8 51.0 50.0 64.2 42.8 48.0
CPO (MYR/MT) 2,523 2,673 2,301 2,784 3,321 3,175 3,205 3,163 3,175 2,174 2,752 3,075
Coal (USD/MT) 66.9 67.9 55.4 51.6 62.6 60.0 58.5 58.0 57.5 78.0 59.1 57.8
Nickel (USD/MT) 15,420 12,765 12,319 14,289 15,727 17,279 17,321 17,365 17,403 13,970 13,698 17,342
Copper (USD/MT) 5,915 5,651 5,389 6,513 7,045 7,770 7,772 7,768 7,754 6,020 6,116 7,766
Gold (USD/oz) 1,483 1,582 1,714 1,911 1,875 1,900 1,944 1,963 1,905 1,393 1,766 1,870
Growth, YoY
Brent Crude Oil (USD/BBL) (9.0) (20.4) (51.2) (30.1) (29.6) (10.5) 46.0 17.7 13.8 (10.5) (33.2) 12.1
CPO (MYR/MT) 27.9 28.0 14.6 35.6 31.6 18.8 39.3 13.6 (4.4) (3.4) 26.6 11.7
Coal (USD/MT) (36.5) (29.8) (31.0) (25.1) (6.4) (11.6) 5.7 12.4 (8.1) (27.3) (24.2) (2.2)
Nickel (USD/MT) 33.1 2.4 0.2 (8.2) 2.0 35.4 40.6 21.5 10.7 5.9 (1.9) 26.6
Copper (USD/MT) (3.9) (9.1) (12.1) 11.7 19.1 37.5 44.2 19.3 10.1 (8.0) 1.6 27.0
Gold (USD/oz) 20.7 21.3 31.0 29.6 26.5 20.1 13.4 2.7 1.6 9.8 26.7 5.9
Note: 4Q20 and 2020 are based on average daily prices until 14-Dec-20. Source: Bloomberg

Strong commodity prices bring positive tailwinds entering 2021, helping exports and
domestic purchasing power before the mass vaccinations in 2Q21. Indonesia’s current
account balance turned positive in 3Q20, as the fall in imports amidst weak domestic
consumption outpaced the decline in exports. With the expected domestic economic
recovery, Indonesia’s imports should begin to recover. Vaccine imports will weigh the trade
balance in 2021, although this is necessary for ensuring economic recovery, hence not a
structurally concerning issue. Regardless, strong commodity prices should provide cushion
in the 2021 trade balance as we transition into an economic recovery path. Bank Indonesia
projects CAD of 1.0-1.5% of GDP for 2021, lower than 2019’s CAD of 2.7%. Our in-house
view is for a CAD of 2.2-2.5% of GDP next year.
FIGURE 62. BREAKDOWN OF INDONESIA’S EXPORTS VALUE BY KEY FIGURE 63. INDONESIA’S CURRENT ACCOUNT TREND VERSUS USD/IDR
COMMODITIES BY 3Q20 TREND
15,000 4%
Other manufacturing products 57% 3%
14,000
2%
Base metal 11% 13,000
1%
Palm oil 10% 12,000 0%
11,000 -1%
Coal 8%
-2%
10,000
Other mining products 6% -3%
9,000
-4%
Other exports 4%
8,000 -5%
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
3Q14
2Q15
1Q16
4Q16
3Q17
2Q18
1Q19
4Q19
3Q20
Agri products 4%
0% 10% 20% 30% 40% 50% 60% USD/IDR Current Account % of GDP (RHS)
Source: Bank Indonesia Source: Bank Indonesia, Bloomberg
 Palm oil (10% of 3Q20 exports). Palm oil exports rebounded 21% QoQ and 13% YoY in
3Q20 to USD 4.1bn, contributing 10.1% of Indonesia’s total exports in 3Q20 from 8.3%
in 3Q19. This is predominantly driven by CPO prices’ recovery, which increased by ~80%
from its low in May-20, reaching the MYR 3,500-3,600/ton level, with an average YTD
price of ~MYR 2,752/ton, 27% higher than 2019’s price of MYR 2,173/ton. After the 21%
QoQ rebound in 3Q20, CPO prices further increased by about ~18% so far this quarter.
We expect tight supply to prevail until at least 1Q21, with yield slowly recovering
afterward. Inventory levels in Malaysia and Indonesia remained low at 1.5m tons in
Sep/Oct, with Malaysia’s 8% stock/usage ratio hovering below its 8-year average of 11%.
CPO production has been adversely affected by prolonged drought and lower fertilizer
application in 2019 as low prices disincentivized farmers, while pandemic-driven labor
shortages in Malaysia further worsened the situation. We expect better palm oil
production this year, given the high rainfall.
Near-term exports should be supported by China and India; though their inventory
levels are considered healthy, we expect exports in 4Q20 and 1Q21 to be supported by
demand from India, following its reduced import levy, while China should start to
prepare for the CNY in February. Consumption recovery in 2021 should further help the
palm oil demand, particularly the demand from HORECA sectors in China, India, and the
EU, while Indonesia’s demand will be supported by biodiesel and household
consumption recovery.
Tight edible oil supply should also be a supporting factor to CPO prices. Soybean prices
have reached a 2-year high, with the recent drought season in the US affecting the
soybean-producing region, while the occurrence of La Nina will disrupt soybean
harvesting in South America. Sunflower and rapeseed oils are also expected to be
weaker due to drought in producing regions.

 Coal (8% of 3Q20 exports). Newcastle coal benchmark price has rebounded to
>USD 70/ton from the lowest point of USD 50/ton in Aug-20, with Indonesia’s coal
benchmarks (ICI3 and ICI4) rebounding even stronger by about 27% and 40% from their
lows, given the demand improvement and production cut. Our analyst, Ariyanto
Kurniawan, recently upgraded his coal price assumption to USD 70/ton in 2021-22 from
USD 60/ton in 2020, citing the following: 1) demand recovery coming from India’s
economic growth recovery and China’s new import quota; 2) 1Q21 production risks
disrupted by the strong La Nina, and; 3) slower production recovery in Indonesia.
After declining 5.7% this year, the global seaborne thermal coal market is estimated to
recover by 1.4% next year, with India driving the recovery, while Indonesia’s thermal
coal exports are estimated to be 4.5% higher next year. Despite China’s focus on clean
energy, coal will still be a dominant energy mix there at 57% by 2025 compared to 58%
in 2019. Efforts to stabilize domestic coal prices may also require China to import more,
with Indonesia standing to benefit since Australia’s quota has not been opened. Back to
the domestic Indonesian market, coal is also expected to remain an important
component in the energy mix, at 50% by 2026, as estimated by PLN, implying a 7%
annual growth until 2016.
 Base metal (11% of 3Q20 exports). The global nickel industry dynamics have
dramatically changed after Indonesia’s implementation of a nickel ore export ban in
2014, triggering a migration of China’s nickel pig iron (NPI) manufacturers to Indonesia
to secure the nickel ore supply, a key ingredient to produce NPI. Indonesia’s nickel
production has jumped by almost fourfold within just 4 years, while the Ministry of
Energy and Mineral Resources estimates Indonesia’s nickel production to increase to
1.1mn tons by 2024 or around 18% CAGR, driven by rising NPI production, with
Indonesia’s share in the global refined nickel production estimated to jump to 40% by
2024 from 19% in 2019. Class I nickel’s share for battery is estimated to remain small at
20% of the total production, though Indonesia has huge limonite ore reserves that are
used for battery. In the near future, however, stainless steel demand remains the most
important driver of demand at around 70% of the nickel market.

Structural Reforms: Omnibus Law, Emerging Nickel/EV Powerhouse
Beginning of the long-awaited reforms. When we published our 2020 outlook in Dec-
2019, the main discussion was about structural reforms, notably with the ongoing refinery
upgrades within the oil industry and the massive mid/down-stream investments within the
mineral industry, such as nickel, copper, and bauxite. Other reforms that we were expecting
to take place were the approval of the Omnibus Laws on Jobs Creation and Tax and the
SOE infrastructure asset recycles—both expected to bring more dollar home. The
pandemic, however, took stage in mid-March, overriding the hopes of reforms. Fast
forward to 4Q20, the reforms began taking place with the Jobs Creation Law securing
parliamentary approval in Oct-20 before being officially signed into law by President
Jokowi in early Nov-20. While vaccine optimism has overtaken the market attention in the
past 1-2 months, we believe the reforms will eventually dominate the mid-to-longer-term
investment theme, starting in 2021, given its implications to the balance of payment.
FIGURE 64. KEY REFORMS TO IMPROVE THE STRUCTURE OF INDONESIA’S BALANCE OF PAYMENT
BoP (USD m) 2005 2010 2015 2019 9M20 Key Reforms
Current Account 278 5,144 (17,519) (30,359) (5,670)
Goods 17,190 31,003 14,049 3,508 18,198
Goods Exports 81,682 149,966 149,124 168,455 117,195
Non-oil and gas 61,203 120,208 130,541 152,930 106,190 Omnibus Law, Mineral Industry Downstreaming
Oil and gas 4,212 3,232 (5,703) (10,319) (4,207)
Others 16,267 26,525 24,287 25,845 15,212 Omnibus Law, Fiscal Incentives
Goods Imports (64,492) (118,963) (135,076) (164,948) (98,997)
Non-oil and gas (48,462) (93,458) (111,518) (140,964) (87,649) Omnibus Law, Fiscal Incentives
Oil and gas (16,030) (25,426) (22,887) (22,300) (10,273) O&G Refinery Plan, Biodiesel Mandate, Fiscal Incentives
Others - (79) (670) (1,683) (1,075)
Services (8,865) (9,791) (8,697) (7,721) (6,682)
Services Exports 13,516 16,671 22,221 31,614 11,513 Tourism Development
Services Imports (22,381) (26,461) (30,918) (39,336) (18,194)
Primary Income (12,840) (20,698) (28,379) (33,775) (21,691)
Secondary Income 4,793 4,630 5,508 7,629 4,505
Capital Account 334 50 17 39 13
Financial Account 11 26,476 16,843 36,614 8,592
Direct Investments 5,271 11,106 10,704 20,053 8,972 Omnibus Law, Mineral Industry Downstreaming
Portfolio Investments 4,189 13,202 16,183 21,990 1,791
Others (9,450) 2,168 (10,044) (5,429) (2,172)
Net Error & Omissions (178) (1,327) (439) (1,618) (181)
Balance of Payment 444 30,343 (1,098) 4,676 2,753
Source: Bank Indonesia, Mandiri Sekuritas
FIGURE 65. CURRENT ACCOUNT TURNED DEFICIT SINCE 2012 AS FIGURE 66. …WHILE CURRENT ACCOUNT DEFICITS HAVE CONTRIBUTED
COMMODITY CRUNCH WEAKENED EXPORTS GROWTH… TO PURCHASING POWER WEAKNESS
6.0% 35% 3.0%
5.0% 30%
2.0%
4.0% 25%
3.0% 1.0%
20%
2.0% 0.0%
15%
1.0%
10% -1.0%
0.0%
5%
-1.0% -2.0%
-2.0% 0%
-3.0%
-3.0% -5%
-4.0% -10% -4.0%

2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
9M20
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
BoP % of GDP Current account % of GDP Financial account % of GDP GDP/Capita, YoY Current Account % of GDP (RHS)
Source: Bank Indonesia, IMF Source: IMF

Jobs Creation Law addresses core issues, expediting structural reforms. Consisting of
15 chapters and 174 articles across 10 key clusters, the Jobs Creation Law amended 73
existing laws, consisting around 1,200 articles. Key objectives of the omnibus law are to
avoid the middle-income trap risk, create more jobs, reduce bottlenecks related to
investments, lower bureaucracy, empower MSMEs & labor, and increase the mix of formal
workers. While the law is designed to expedite the structural reforms in Indonesia through
much bigger direct investments, we believe this has not been fully priced in by the market,
as Indonesia’s equity market rebound took place after the US Election result and the
positive vaccine developments. The release of the implementing regulations, which should
be anytime between now until early Feb-21 at the latest, will be crucial. We believe
investors have not fully priced in the potential reforms, given the classical execution
problems in the past. This should be the upside opportunities, we think.
FIGURE 67. JOBS CREATION LAW IS DESIGNED TO DELIVER ECONOMIC TRANSFORMATION
Source: Bank Indonesia, Coordinating Ministry for Economic Affairs
FDI increases through direct investment and new SWF formation. With the relatively
low FDI portion to GDP, the direct investment flows into Indonesia have not been enough
in funding the current account deficit problem that has been a clear disruption to the
domestic economic growth and wealth creation. Reforms have been expedited, such as the
huge efforts in building new infrastructures and increasing manufacturing value-add
through downstreaming plans across certain commodities. In 2016, a tax amnesty program
was held to bring more dollars home, though the impact toward direct investment was
somewhat limited. Key issues in investing in Indonesia have been the uncertainties, such as
layers of overlapping regulations, bureaucracies, and lack of synchronization between
regulators. The Jobs Creation Law aims to address these to improve the investment climate
while creating more openness to foreign investments.
In recent years, there have been progress in the recovery of FDI across the secondary
sectors, predominantly driven by the downstreaming of the mineral resource industry. This
is the aftermath of the government’s decision to ban nickel ore exports in 2014, triggering
massive midstream and downstream investments to refine nickel ore domestically. With
the omnibus law, we think FDI flows should be more pronounced.

FIGURE 68. SINCE 2005, INDONESIA’S FDI INFLOWS AS % OF GDP FIGURE 69. YET, THERE HAVE BEEN REBOUNDS IN SECONDARY SECTOR
PEAKED IN 2015 FDI MIX, DRIVEN BY METAL INDUSTRIES
35 3.5% 100%
3.3% 90%
30
3.1% 80%
25 2.9% 70%
2.7% 60%
20
2.5% 50%
15 2.3% 40%
10 2.1% 30%
1.9% 20%
5
1.7% 10%
- 1.5% 0%
3Q90
4Q91
1Q93
2Q94
3Q95
4Q96
1Q98
2Q99
3Q00
4Q01
1Q03
2Q04
3Q05
4Q06
1Q08
2Q09
3Q10
4Q11
1Q13
2Q14
3Q15
4Q16
1Q18
2Q19
3Q20
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
FDI (USD bn) FDI % of GDP (RHS) 2020 Primary Sector Secondary Sector Tertiary Sector
Source: Bank Indonesia Source: Bank Indonesia
We think investors should look into the following for the next FDI upcycle:
 More openness to FDI through a revision of the negative investment list, potentially
released in 1Q21, with some items to be moved into the positive investment list. The
omnibus bill has already addressed that only six sensitive sectors are banned from
foreign investments, with an aim of opening more sectors for foreign investments that
also include revising the ownership cap. The omnibus law also simplifies the licensing
process into a risk-based approach, classifying investments into low, medium, and high
risk.
 Unprecedented pandemic calls for more supply chain diversification. Earlier in Oct-
20 during our webinar, Indonesia’s Coordinating Board of Investment (BKPM)
mentioned that it has identified that 152 companies may move to Indonesia, broken
down into the following: 13 companies have confirmed to relocate/diversify to
Indonesia, 15 already have the intention, and 124 have the potential. The 13 companies
that have already confirmed their plan come from Japan (4 companies), Taiwan (3), the
US (2), South Korea (2), and Hong Kong/China (2). While the result of the US election
may lead to some changes, we still think the US-China tension will continue, albeit more
implicitly and not via a direct trade war.
 Rp708tn worth of investment backlog is aimed to be addressed, with the issue

revolving mainly within the regional level’s licensing progress, especially within the
spatial planning. The government plans to utilize the spatial design plan (RDTR), which
is accessible online; thus, companies will only need to confirm the location with RDTR
instead of applying for location permit. In mid-Oct, during our Omnibus Law event, the
BKPM mentioned it has succeeded in facilitating about Rp413tn (58%) of the bottleneck
in the last 6 months and aims to solve the remaining by end of 2020. The notable
investments that have been facilitated include Rosneft (Rp211.9tn), Lotte Chemical
(Rp61.2tn), Vale Indonesia (Rp39.2tn), YTL Power (Rp38.0tn), Hyundai (Rp21.7tn),
Kobexindo (Rp14.0tn), Nindya (Rp9.5tn), and Tenaga Listrik Bengkulu (Rp5.2tn).
 Establishment of the Nusantara Investment Authority to expedite structural

reforms. The establishment of Indonesia’s sovereign wealth fund is mandated to carry
the government’s investment under separate government legal entities. The mandate
will be commercially driven, seeking long-term return and economic development,
aimed at solving three critical issues: 1) Indonesia is not yet a stable investment
destination for FDI; 2) large infrastructure funding gap, especially for the transportation
sector, and; 3) reduction of CAD through structural economic transformation. Given
Indonesia’s twin-deficit, the fund will do partnership with third parties by establishing
master fund and sub-fund.

Indonesia’s government reportedly is committed to provide an initial capital of USD 5bn

through cash transfer and transfer of shares from private/listed SOEs to invest in the
funds, while the NIA is expected to have several thematic sub-funds based on the
investors’ risk-return profile with medium-to-long-term horizons of around 5-30 years.
The fund is expected to start its commercial operation in 4Q20, aiming for a first
investment in 1Q21. The near-term objective is to start with domestic infrastructure
projects (i.e., toll roads, airports, and seaports) while seeking long-term opportunities
within pharmaceutical, healthcare, technology, and tourism sectors.
The team has actively met with the potential investors. The US International
Development Finance Corporation (IDFC) has signed, on 19-Nov-20, a letter of interest
to invest USD 2bn in the NIA. On 4-Dec-20, it was reported that the Japan Bank for
International Cooperation (JBIC) has agreed to support a USD 4bn funding. The
government is still seeking partnerships with more funds, including those in the Middle
East. In relative context, the amounts are considered sizeable relative to the 2015-19
average direct and portfolio investments at USD 15.8bn and USD 17.5bn, respectively.
 Midstream and downstream investments in mineral industry. Since 2014, metal

industries recorded a total FDI of USD 18.7bn. The share of FDI coming into the metal
industry has increased from 5.0% in 2014 to 8-13% in 2015-19 and to a further 21% in
9M20, predominantly driven by the rush of investments into the nickel pig iron facility
as the government announced a plan to ban the exports of nickel ore in 2014. Factories
established by Tsingshan in Morowali and Jiangsu Delong in Konawe have now
emerged as the lowest-cost producers of stainless steel globally.
FIGURE 70. FDI FLOWS INTO THE METAL INDUSTRIES HAVE JUMPED FIGURE 71. INDONESIA’S RKEF HAS EMERGED AS AMONG THE LOWEST-
SINCE THE NICKEL ORE EXPORTS BAN IN 2014 COST PRODUCERS GLOBALLY
1,800 25% 14,000 USD/t Ni
1,600
12,000 Ore freight, 519
1,400 20%
10,000
1,200 Ore purchase
15% costs, 5,406
1,000 8,000 Ore freight, 0
Ore purchase
800
10% 6,000 costs, 2,688
600
400 4,000 Smelting/Others,
5% Smelting/Others,
6,416
200 2,000 5,364
0 0%
-
1Q07
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
3Q14
2Q15
1Q16
4Q16
3Q17
2Q18
1Q19
4Q19
3Q20
China RKEF Indonesia RKEF
FDI in Metal Industry (USD m) % of total FDI (RHS) Smelting/Others Ore purchase costs Ore freight
Source: BKPM Source: Wood Mackenzie (2019), Ministry of ESDM
Massive downstreaming of mineral resources industry is a game-changer. The

decision to ban nickel ore exports in 2014 has triggered massive investments to establish
nickel smelters in Indonesia. More investments are expected to come, which should be
sizeable to FDI and the future trade balance through higher exports of value-added
products. On 19-Oct-20, our analyst, Ariyanto Kurniawan, came up with a great report
(https://www.mandirisekuritas.co.id/r/HboD?c=rsch) on Indonesia’s nickel supply chain
outlook; we summarized the key takeaways here.
 Nickel smelters: Ministry of Energy and Mineral Resources expect to around 29 nickel
smelters commercializing by 2022, potentially absorbing ~50mn tons of nickel ore
production. Assuming 1mn tons of nickel production in 2023 (twice of 2019’s figure)
and 3mm tons of domestic stainless-steel capacity, exports could reach ~850k tons by
2023 if 1mn ton of stainless-steel needs 5% nickel. At USD 15k/ton, this totals to
USD 13bn in NPI exports, without factoring the stainless-steel production that have
export portions too.

Indonesia’s iron and steel production have jumped from USD 1.1bn in 2014 to
USD 7.4bn in 2019 as a result of the nickel ore export ban announcement, while the
Ministry of Energy and Mineral Resources’ latest presentation material shows a
projection of the refined nickel production increasing to ~1mn tons Ni in 2022F from
~0.5mn tons Ni in 2019 and to reach almost ~1.3mn tons Ni in 2024. Therefore, the
refined nickel output volume is projected to increase by ~2.6x between 2019 and 2024,
which we believe will be targeted for exports market. The projection is based on an
assumption that the number of operating smelters will increase from 20 in 2019 to 30
by 2021, 36 by 2022, and 39 by 2023; this means that FDI flows will still be coming into
the metal industries.
The Ministry of Industry also made a projection that the value-add from the nickel
downstreaming in Morowali reached Rp92tn in 2019 and is projected to reach Rp186tn
in 2020, Rp154tn in 2021, and Rp227tn in 2022. These are sizable compared to the
<Rp20tn value-add prior to 2018.
FIGURE 72. INDONESIA’S IRON & STEEL EXPORTS HAVE JUMPED FIGURE 73. INDONESIA’S REFINED NICKEL PRODUCTION IS ESTIMATED
SHARPLY SINCE THE NICKEL ORE EXPORTS BAN TO INCREASE BY 2.6X BETWEEN 2019 AND 2024
8.0 6.0%
7.0
5.0%
6.0
4.0%
5.0
4.0 3.0%
3.0
2.0%
2.0
1.0%
1.0
- 0.0%
2014 2015 2016 2017 2018 2019 10M20
Iron & Steel Exports (USD bn) % of Exports (RHS)
Source: BPS Source: Ministry of ESDM
FIGURE 74. NICKEL SMELTERS PLAN: 19 IN OPERATION (GREEN), 12 FIGURE 75. VALUE-ADD CREATIONS FROM THE NICKEL
UNDER CONSTRUCTION (PURPLE), 3 IN FS STAGE (RED) DOWNSTREAMING IN MOROWALI
250
227
200 186
154
150
100 92
72
50
17 20
-
2016 2017 2018 2019 2020F 2021F 2022F
Value-add (Rp trn)
Source: Ministry of Industry Source: Ministry of Industry
 HPAL smelters: The current nickel production mostly uses saprolite, while the limonite is
stored for later use as feedstock to produce nickel sulfate for batteries’ high-pressure
acid leach (HPAL) technology. Future demand for this Class I nickel is promising given
the projection of global EV growth. Wood Mackenzie estimated that Ni demand would
increase from 2.4mn tons in 2020 to 4.0mn tons in 2040, driven by batteries from 3% of
total demand in 2020 to 30% while stainless steel will decline from 71% to 48%. The
government has also announced its plan to form an SOE consortium, involving MIND ID,

Aneka Tambang (ANTM), Pertamina, and PLN, to enter the battery supply chain. The
plan should increase the interests of third parties in developing the battery supply chain
in Indonesia. Assessments are being made on the potential partners to establish HPAL
as well as the FeNi/NPI factory, with a possibility to build nickel sulfate factory too.
Five companies have plans to construct HPAL smelters to refine the limonite ores into
MHP and MSP, which will be used as the key materials for battery. Out of the five
smelters, three are in construction with 2021 commercialization target, and two are in
feasibility study. The investments may total ~USD 4.7bn. Considering the high capital
and risk of failures, given the advanced technology requirements, the investment
decision suggests bullish narratives on the refined nickel industry.
FIGURE 76. HPAL PROJECTS COMMITMENT

Capital
Output Capex Commercial
Projects Status Location Principal partners Process Intensity
(k tons Ni) (USD mn) operations
(USD/t Ni)
PT Halmahera Persada
Construction Obi Island Ningbo Lygend, Harita HPAL 30 700 20.000 2021
Lygend
PT QMB New Energy Construction Morowali Tsingshan, GEM, CATL HPAL 35 700 20.000 2021
Huayou, Tsingshan,
Huayue Nickel & Cobalt Construction Morowali HPAL 2 x 30 1.280 21.333 2021
Woyuan
Pomalaa Feasibility study Pomalaa Sumitomo/Vale (INCO) HPAL 40 2.000 50.000 2023+
PT Ceria Feasibility study Kolaka Ceria Bugraha Indotama HPAL 40 2023+
Source: Ministry of ESDM
FIGURE 77. HPAL DEVELOPMENT IN INDONESIA THUS FAR
Source: Ministry of Industry
 Indonesia’s EV plan: The Ministry of Industry’s latest roadmap sets an ambitious target
to boost the competitiveness of automotive components and support the domestic EV
adoption. It is broken down into three horizons, spanning until 2020: 1) Horizon I 2021
(3-5 years) focuses on strengthening local ICE production through raw material
production capabilities and new technology adoption to boost productivity; 2) Horizon
II 2025 (5-10 years) focuses on initiating local production for electric 2W by setting a
clear phase-out plan for fuel-based 2W, building the required infrastructures,
incentivizing electric 2W adoption, and establishing an R&D center for EV components,
and; 3) Horizon III 2030 (10-15 years) focuses on initiating the local production of EV by
setting a clear phase-out plan for ICE vehicles, encouraging continuous improvement in
EV component production, and building the domestic production capabilities for EV.

FIGURE 78. AUTOMOTIVE ROADMAP

ITEM 2020 2025 2030 2035
Production Total (Unit) 1,500,000 2,000,000 3,000,000 4,000,000
Sales Total (unit) 1.250.000 1.690.000 2.100.000 2.500.000
MOTOR Export Total (unit) 250 310 900 1.500.000
VEHICLE Volume LCEV 150,000 400,000 750,000 1,200,000
Percentage LCEV (%) 10 20 25 30
Percentage LCGC (%) 25 20 20 10
MOTOR Production Total (unit) 7,500,000 8,800,000 9,800,000 10,750,000
CYCLE Sales Total (unit) 6,750,000 7,700,000 8,400,000 9,000,000
Export Total (unit) 750,000 1,100,000 1,400,000 1,750,000
Percentage Electric Motorcycle % 10 20 25 30
Source: Ministry of Industry
The Ministry of Industry also outlaid its projection for EV and ICE sales volume to reach
3mn units in 2030, with around 25% being LCEV, while the Ministry of Mineral and
Resources targets 2.2k units of EV 4W and 2.1mn units of EV 2W by 2025. The
government also aims to build 1,000 charging stations by 2025, up from 62 currently.
MIND ID’s latest presentation projects EV adoption at 300k-600k units of sales volume in
2035, with Indonesia’s battery capacity projected to reach 29/3 GWH by 2035, assuming
40 KWh/battery/car.
FIGURE 79. INDONESIA BATTERY DEMAND PROJECTION
GWh
35
29.3
30
25.6
25 21.7
20 Begin EV 18
New Capital
Adoption City Operates 14.9
15 11.9
9.8 8-10 GWH
10 7.6 Planned
5.9
4.6 Capacity
5 1.9 2.4
0.2 0.3 0.7 1.1
0
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Source: Mind ID Presentation

Index Target and Valuations

End-2021 JCI Index Target of 6,850
Our base target of 6,850 is derived based on EPS growths of negative -28% in 2020 and
30%/12% in 2021/2022, as we sanitized our bottom-up estimates by -10% in 2021. We set
our 1-year forward target PE multiple at 16.9x, which is derived from a 6.0% risk-free-rate,
2.5% risk premium, and 2.5% dividend yield target.
Upside Scenario: 7,300. Our bull case assumes 2020 EPS decline of -25% and 2021/2022
EPS growths of 32%/10%. Target forward PE is set at 17.2x, assuming further slide in risk-
free rate to 5.8% by end-2021, while risk premium and target dividend yield are unchanged
compared to the base case. The bull case largely depends on an effective and timely
deployment of vaccines that will flatten the COVID-19 curve.
Downside Scenario: 5,270. Our bear case assumes 2020 EPS decline of -28% and
2021/2022 EPS growths of 25%/8%. Target forward PE is set at 14.3x, assuming risk-free
rate of 6.5% and risk premium of 3.0%, while target dividend yield is unchanged at 2.5%.
This could take place if the key risks are materializing, such as the delay in mass vaccines
deployment to 3Q20 instead of 2Q20, which could lead to risks of mobility stalls in 1H21.
Catalysts: 1) Effective vaccines ending the pandemic; 2) renewed dollar weakness;

3) supportive monetary and fiscal; 4) strong commodity prices, and; 5) FDI inflows with
further evidence of Indonesia entering a new cycle of commodity boom, as it fits in with
the global green initiative.
Risks: 1) Uncontrollable COVID-19 outbreaks that may lead to temporary lockdowns;

2) issues in vaccine deployment; 3) unexpected geopolitical risks under the new US
leadership; 4) contractionary fiscal risks, as Indonesia needs to transition to the 3.0% deficit
ceiling by 2023, and; 5) poorly executed reforms post-omnibus law.
FIGURE 80. END-2020 JCI INDEX TARGET SCENARIOS

End-2020 JCI target Base Downside Upside
Target Risk-Free Rate 6.0% 6.5% 5.8%
Target Risk Premium 2.5% 3.0% 2.5%
Target PE (x) 16.9 14.3 17.2
2020F EPS growth -28% -28% -25%
2021F EPS growth 30% 25% 32%
2022F EPS growth 12% 8% 10%
2020F EPS (Rp) 278 274 292
2021F EPS (Rp) 361 341 387
2022F EPS (Rp) 405 369 426
JCI Index Target 6,850 5,270 7,300
FIGURE 81. SENSITIVITY OF FORWARD PE MULTIPLES TO CHANGES IN RISK-FREE RATE AND RISK PREMIUM ASSUMPTIONS
Scenario variables 50bps Chg in Risk-Free Rate 25bps Chg in Risk Premium
Indo 10Y 5.5% 6.0% 6.5% 7.0% 5.5% 5.5% 5.5% 5.5%
Implied Equity Risk Premium 2.5% 2.5% 2.5% 2.5% 3.0% 2.8% 2.5% 2.3%
Implied PE (x) 18.2 16.7 15.4 14.3 16.7 17.4 18.2 19.0

Valuations
The JCI’s forward PE has re-rated to ~16.2x based on Bloomberg (+1.2 SD) and ~18.1x (+1.9
SD) using Factset consensus, initially driven by the further decline in risk-free rate. Over the
last one month, nonetheless, the decline in the implied equity risk premium as a result of
rising vaccine optimism fueled the rally further. Valuation is expensive relative to history,
but not relative to peers (especially the Developed Market), and adjusted for the risk-free
rate and forward EPS growth. Foreign flows have been in favor lately but are still far from
the pre-pandemic level. The success of the structural reforms could increase Indonesia’s
appeal.
FIGURE 82. JCI’S FORWARD PE USING BLOOMBERG CONSENSUS FIGURE 83. JCI’S FORWARD PE USING FACTSET CONSENSUS
18.0 18.0
+2 STD +2 STD
16.0 +1 STD 16.0 +1 STD
10Y Mean 10Y Mean

14.0 -1 STD
14.0 -1 STD
-2 STD -2 STD
12.0 12.0
10.0 10.0
8.0 8.0
6.0 JCI's 1Y 6.0

JCI's 1Y
Forward PE (x) Forward PE (x)
4.0 4.0
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Source: Bloomberg Source: Factset
FIGURE 84. 2021 PE COMPARISON FIGURE 85. 2021 EPS+ GROWTH COMPARISONS
US S&P 500 21.3 Indonesia 33%

Japan 20.7 Philippines 27%
US Dow … 20.0 South Korea 26%
Philippines 19.3 Singapore 25%
Thailand 18.8 Vietnam 20%
Malaysia 17.2 Hong Kong 15%
Indonesia 15.8 China 14%
Singapore 13.8 US S&P 500 13%
South Korea 13.6 Thailand 12%
Vietnam 13.5 Japan 10%
China 12.9 US Dow Jones 9%
Hong Kong 12.0 Malaysia 5%
- 5.0 10.0 15.0 20.0 25.0 0% 5% 10% 15% 20% 25% 30% 35% 40%
Source: Bloomberg, Mandiri Sekuritas estimates Source: Bloomberg, Mandiri Sekuritas estimates
FIGURE 86. 1Y BOND AND EARNINGS YIELD SPREAD FIGURE 87. 10Y BOND AND EARNINGS YIELD SPREAD
3.0 8.0
2.0 7.0
1.0 6.0
- 5.0
1Y Mean
(1.0) 4.0
10Y Mean
(2.0) 3.0
(3.0) 2.0 10Y Bond Yield Minus Forward

1Y Bond Yield and Equity
(4.0) Earnings Yield Spread 1.0 Dividend Yield
(5.0) -
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
1Y Bond Yield Minus Equity Earnings Yield 10Y Mean 10Y Minus Dividend Yield Avg
Source: Bloomberg, Mandiri Sekuritas Source: Bloomberg, Mandiri Sekuritas

FIGURE 88. CUMULATIVE FOREIGN FLOWS SINCE 2013 FIGURE 89. FOREIGN OWNERSHIP IN EQUITY AND BONDS
20.0 70.0% 45.0%
(30.0) 65.0% 40.0%
60.0% 35.0%
(80.0)
55.0% 30.0%
(130.0)
50.0% 25.0%
(180.0)
45.0% 20.0%
Oct-15
Oct-18
Nov-19
Jan-15
Apr-17
Jan-18
Apr-20
Mar-16
Dec-16
Dec-20
Aug-20
Jul-16
May-18
Feb-19
Jul-19
Sep-17
Jun-15
(230.0)
Oct-16
Nov-13
Nov-18
Jan-13
Apr-14
Jan-18
Apr-19
Dec-15
Mar-17
Dec-20
Aug-17
Feb-15
Jul-15
May-16
Feb-20
Jul-20
Sep-14
Sep-19
Jun-13
Jun-18
Equity (LHS) Bonds (RHS)
Source: Mandiri Sekuritas, Ministry of Finance Source: KSEI, Ministry of Finance
FIGURE 90. FOREIGN FLOWS BY SECTORS: ALL TRANSACTIONS

Net foreign flows (Rp bn) Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 YTD
ANIMAL FEED & FISHERY -241 -199 -81 -10 -139 -64 181 -68 -97 -42 102 -103 -762
AUTOMOTIVE -83 304 -321 -1,044 -76 88 538 -200 -867 736 -154 171 -908
BANK 1,063 -3,451 -4,774 -4,301 -1,808 468 155 -1,725 -9,683 4,492 6,399 2,434 -10,730
BUILD. MATERIAL 144 -350 -103 -249 -246 -24 -456 -294 -328 -116 191 -33 -1,866
CHEMICALS 137 20 73 -81 70 -42 -4 -103 -132 -65 -2 17 -112
COAL -145 202 30 -24 -534 -533 18 72 -259 -401 -789 -517 -2,883
CONSTRUCTION -434 -279 -294 -567 -2,124 -279 -1,195 -466 50 -272 -457 -68 -6,386
ENERGY -40 -30 -67 -314 -374 -253 -194 -199 -291 -218 -62 -213 -2,255
FINANCIAL 304 -181 -700 -249 55 493 -260 -109 271 105 480 176 386
HEALTH CARE -203 -256 -5 -26 6 -33 -167 274 58 -84 -538 -72 -1,045
HOTEL & TOURISM 933 161 31 -6 22 7 45 54 50 32 -223 -7 1,098
INVESTMENT 41 67 -10 20 -11 -53 -42 -261 -94 -33 -20 -38 -436
MEDIA -81 -418 115 -511 -314 -134 -467 122 -381 -254 -202 -1,320 -3,843
METAL & ALLIED PROD. 11 2 4 304 -26 -6 -6 -4 2 -4 6 17 300
METAL MINING 105 359 287 48 215 -42 278 553 -499 -5,382 664 653 -2,759
OIL & GAS -27 74 13 -12 -7 -7 -85 50 -98 -7 218 -44 67
OTH. - MISC. INDUSTRY 191 -8 38 121 16 33 74 -20 -13 61 -7 -23 464
PHARMACEUTICALS -82 -35 -94 -509 -258 -389 -237 19 -162 -72 16 -69 -1,871
PLANTATION 13 -126 -37 -33 15 -83 -24 -33 -136 -75 -215 -121 -854
PLASTICS & PACKAGING 0 -1 0 0 0 -1 26 1 -2 -4 -5 -3 11
PROPERTY -196 47 -133 -579 -756 -226 -760 -266 -164 -148 -138 -224 -3,543
PULP & PAPER 269 29 895 195 -178 -328 126 -29 -65 -2 -275 110 747
RETAIL TRADE -646 -148 52 77 -391 -450 -194 -346 -159 -66 100 -62 -2,231
STAPLES -242 -177 4 -235 -28 339 289 -321 -864 59 -801 -1,181 -3,158
TELECOMUNICATION -951 319 -419 -453 -647 -2,881 -1,323 -2,330 -1,077 -1,494 970 -1,500 -11,788
TEXTILE 83 -14 14 -3 -46 -15 -4 1 6 -21 -17 3 -12
TOBACCO 25 -395 -190 -174 176 -110 -189 -311 -304 -122 -815 -907 -3,316
TOLL ROAD 2 55 1 -53 -355 -16 120 -152 -206 -27 81 50 -499
TRANSPORTATION 44 -27 -44 1 -59 114 -86 -45 104 158 9 -47 124
WHOLESALE 37 -303 38 -149 -203 -63 -6 -50 -242 -440 -480 323 -1,538
Grand Total 33 -4,757 -5,677 -8,817 -8,000 -4,491 -3,849 -6,188 -15,582 -3,706 4,037 -2,600 -59,597
Source: Mandiri Sekuritas Proprietary Research

Stock Recommendations
Sticking with cyclical preferences with some quality defensives. We officially closed our
barbell portfolio strategy in early November, right after the US Election; it has worked out
well, with the JCI Index rebounding 14% since then, driven by the cyclicals. We still see
room for cyclical outperformance going into 2021, though we still assigned 3 defensive
counters out of our 12 most preferred stocks. Navigating the path is the key, a reason why
we keep some defensive names that have been underperforming this quarter. Valuation-
wise, cyclical stocks have also re-rated substantially. As such, we think it is wise to keep
some underperforming defensives that could deliver growth in 2021.
FIGURE 91. NAVIGATING THE 2021 PATH: WHAT TO FOCUS ON IN 1Q21, 2Q21, AND 2H21
Dec-20 to 1Q21 1H21 2H21
• Market will be paying attention to the • Attention in early 2021 should shift • It should be the consensus
efficacy results of several vaccines that into the arrival of the first meaningful expectation that 2021 earnings
have not released the updates, most vaccine batches recovery will be backloaded, as mass
importantly the suppliers for vaccinations begin only in 2Q21.
Indonesia: Sinovac, Novavax, and • Focus will immediately shift into the Earnings data points will be valid here.
Sinopharm among others. logistical challenges in distributing the
vaccines to Indonesia • Market would probably assume the
• Until public vaccinations take place in path to show the pandemic's end in
2Q21, risks remain on any potential • As the first batches are injected, 2H21. This will be crucial.
mobility restrictions if the pandemic market will be paying attention into
worsens the vaccine efficacy in controlling the
pandemic
Source: Mandiri Sekuritas
FIGURE 92. DEFENSIVES OVER CYCLICALS FORWARD PE FIGURE 93. 2021F PE VERSUS 2021F EPS GROWTH
2.6 140.0%
2.4 120.0%
Construction &
Oil and Gas materials
2.2
2.0 100.0%
1.8 Poultry
EPS Gr
80.0%
1.6 Property & Industrial
Estate
1.4 60.0% Banking
1.2
40.0% Mandiri Universe Healthcare
1.0 Consumer
CommoditiesConsumer staples
discretionary
0.8 20.0%
Oct-12
Oct-17
Jan-14
Apr-15
Jan-19
Apr-20
Dec-10
Mar-12
Dec-15
Mar-17
Dec-20
Jul-11
Jul-16
Sep-14
Sep-19
Jun-13
Jun-18
Telecom
0.0%
0.0 10.0 20.0 30.0 40.0 50.0 60.0
Defensives ex-GGRM HMSP/Cyclicals (x) Mean PER
Source: Bloomberg, Mandiri Sekuritas Source: Bloomberg, Mandiri Sekuritas estimates
Most and least preferred counters. Our preferred cyclicals are Banks (BBNI, BBTN),
Building Materials (SMGR), Infrastructures (JSMR), Property (BSDE), Commodities (UNTR),
Industrials (PGAS), and Consumer Discretionary (ASII, MAPI). Our preferred defensives are
Telecom (TLKM, EXCL) and Healthcare (MIKA). Consumer Staples is our least preferred
amidst a two-speed economy. New additions are MIKA, SMGR, JSMR, and MAPI to replace
UNVR, ICBP, INTP, and MDKA.

FIGURE 94. OUR MOST PREFERRED STOCKS (IN ALPHABETICAL ORDER)

Last Target Mkt PE PBV EV/EBITDA EPS growth Rel. performance to
Ticker Company Name Rating Price Price cap (x) (x) (x) (%) JCI
(Rp) (Rp) (Rp Bn) 20F 21F 20F 21F 20F 21F 20F 21F 1M 3M 6M
Defensives Picks
EXCL XL Axiata Buy 2,620 3,600 27,902 12.8 20.8 1.3 1.3 4.8 4.4 207.9 -38.7 4.3 -1.1 -20.9
MIKA Mitra Keluarga Karyasehat Buy 2,770 2,750 40,306 73.7 61.2 8.9 8.1 48.7 39.2 -25.1 20.5 10.9 5.5 -6.8
TLKM Telkom Indonesia Buy 3,320 3,900 328,887 17.0 15.6 3.2 3.1 5.9 5.7 4.0 8.4 0.9 -1.6 -12.1
Cyclicals Picks
ASII Astra International Buy 5,675 6,300 229,744 12.9 12.7 1.5 1.4 10.8 9.2 -18.2 1.9 -13.9 2.0 -4.7
BBNI Bank Negara Indonesia Buy 6,575 7,500 122,615 28.9 8.9 1.1 1.0 N.A. N.A. -72.4 223.7 6.3 13.7 23.9
BBTN Bank Tabungan Negara Buy 1,840 1,900 19,486 12.9 9.2 1.1 1.0 N.A. N.A. 621.6 40.4 3.8 16.9 40.4
BSDE Bumi Serpong Damai Buy 1,085 1,160 22,971 16.4 11.2 0.7 0.7 12.1 11.3 -54.4 46.5 -4.2 27.2 19.6
JSMR Jasa Marga Buy 4,560 7,040 33,096 59.4 16.9 1.8 1.6 22.1 12.1 -74.7 251.0 0.3 10.2 -8.6
MAPI Mitra Adiperkasa Buy 895 1,000 14,857 -8.7 27.3 3.5 3.1 -138 8.7 n/a n/a 8.4 25.6 -3.9
PGAS Perusahaan Gas Negara Buy 1,715 1,700 41,574 27.5 13.3 1.1 1.1 8.2 6.6 56.4 109.1 35.2 33.3 40.9
SMGR Semen Indonesia Buy 12,000 11,020 71,178 28.2 25.2 2.1 2.0 10.9 10.3 5.4 12.1 -3.0 5.3 4.5
UNTR United Tractors Buy 27,400 31,700 102,206 14.2 9.6 1.6 1.4 5.7 4.3 -36.6 47.8 19.6 2.7 43.4
Note: Additions: MIKA, SMGR, JSMR, MAPI. Deletions: UNVR, ICBP, INTP, MDKA. Source: Bloomberg, Mandiri Sekuritas estimates
FIGURE 95. 5-YEAR Z-SCORES FOR 2021 PE FIGURE 96. 5-YEAR Z-SCORES FOR TRAILING PBV
RALS 7.3 BNLI 3.6

BNLI 6.0 MDKA 3.1
INDY 6.0 PGAS 3.0
SILO 5.4 SIDO 2.4
BEST 3.2 DMAS 1.8
BBRI 2.5 BBCA 1.0
MDKA 2.5 BTPS 0.8
MIKA 2.3 ACES 0.3
BBCA 2.2 MYOR 0.2
CPIN 2.2 ANTM 0.2
ERAA 2.0 UNVR 0.1
SMGR 2.0 CPIN 0.1
PZZA 2.0 HEAL 0.1
TBIG 2.0 MAPI 0.0
SIDO 1.7 TINS 0.0
MAPI 1.4 ERAA (0.1)
ACES 1.4 INCO (0.1)
ADRO 1.2 MIKA (0.2)
PWON 1.1 INDY (0.3)
ITMG 1.1 HRUM (0.4)
BTPS 1.0 BBRI (0.4)
ADHI 1.0 LPPF (0.4) 5Y Z-Score
INTP 0.9 5Y Z-Score PZZA (0.4)
MYOR
BFIN 0.9
0.8 for 2021F PE JPFA
SCMA
(0.5)
(0.5)
for Trailing
BJBR 0.8 BJBR (0.5)
BJTM 0.6 TOWR (0.5)
TLKM 0.4 BFIN (0.5)
JPFA 0.4 ICBP (0.6)
LPKR 0.3 MLBI (0.6)
DMAS 0.2 BBTN (0.6)
INCO 0.2 ADRO (0.6)
WIKA 0.1 BJTM (0.7)
PTPP 0.1 TBIG (0.7)
PTBA 0.0 MAPA (0.8)
TINS 0.0 CTRA (0.8)
PGAS (0.0) ITMG (0.8)
MAPA (0.1) BNGA (0.8)
UNVR (0.1) WIKA (0.8)
BBTN (0.1) BEST (0.9)
ANTM (0.1) PTBA (0.9)
MAIN (0.2) ADHI (0.9)
BIRD (0.2) UNTR (0.9)
HRUM (0.2) HMSP (1.0)
SMRA (0.2) SILO (1.0)
BBNI (0.2) JSMR (1.0)
ASII (0.3) ASRI (1.0)
SCMA (0.3) WSKT (1.0)
CTRA (0.4) PTPP (1.0)
ASRI (0.4) BIRD (1.0)
EXCL (0.4) TLKM (1.0)
JSMR (0.4) MNCN (1.0)
TOWR (0.5) PNBN (1.0)
BSDE (0.7) BBNI (1.1)
JRPT (0.7) ISAT (1.1)
ICBP (0.8) SMRA (1.1)
PNBN (0.8) SMGR (1.1)
BNGA (0.9) MAIN (1.2)
UNTR (1.0) INTP (1.2)
LPPF (1.1) LPKR (1.2)
HMSP (1.2) JRPT (1.2)
HEAL (1.4) BDMN (1.2)
WSKT (1.4) BSDE (1.3)
ISAT (1.5) GGRM (1.3)
INDF (1.5) EXCL (1.3)
MNCN (1.6) RALS (1.4)
GGRM (1.8) PWON (1.4)
BDMN (1.9) INDF (1.4)
MLBI (2.7) ASII (1.6)
(4.0) (2.0) - 2.0 4.0 6.0 8.0 (2.0) (1.0) - 1.0 2.0 3.0 4.0

Sector View
Automotive
Sector Rating: Overweight

Analyst(s): Ariyanto Kurniawan/Wesley Louis Alianto
Automotive recovery is rather gradual than V-shaped. As 4W sales have gradually

recovered from the bottom in 2Q20, we expect a gradual recovery going forward amid still
weak purchasing power. We forecast 4W wholesales to reach 834k units in FY21F (+25%
YoY) and 917k units in FY22F (+10% YoY). Our forecast is more aggressive than ASII’s
internal forecast of 750k units in FY21F, still 25% below the 2019 number, with the export
market expected to recover faster than the domestic. Commercial vehicle sales have
recovered faster than passenger car sales, indicating recovery in economic activities, with
the Sep–Oct-20 number reaching the Mar-20 level, while passenger car sales were still 35%
below Mar-20. We also see growing interest in SUV and a pick-up relative to other
segments, given the strong product line-up, including those with lower prices, which we
think will continue to next year.
Meanwhile, recovery in the 2W market will depend on GDP growth and credit availability,
as 65-75% of sales are using financing. Though people prefer using private vehicles to
avoid crowds, weak purchasing power and priority shift in spending hinder growth in 2W
sales. ASII targets 4.0mn-4.3mn units of 2W sales in FY21F, still up to 38% lower than in
2019. ASII is undisputed in the 2W market, with an 80% market share.
Competition in the low-segment car market is heating up. While Toyota (Avanza and
Calya)/Daihatsu (Xenia and Sigra) remain the most popular model in the Rp200mn
segment, we see competition is heating up, with new players entering the market, offering
better specifications and accessories. KIA, through its new venture with Indomobil (IMAS),
recently introduced the small SUV KIA Sonet with a price range of Rp193mn-289mn, which
was very successful in India. Nissan Magnite, also distributed by IMAS, may also enter the
market sometime next year. While this is not new for ASII—given that that the segment
contributes the biggest chunk of the market, roughly up to 60% of market share—ASII’s
extensive dealership, strong support from its financing units, and strong after-sales service
still guarantee its strong position, considering those aspects are difficult for competitors to
replicate.
A long way to go for EV in Indonesia. The growing EV market globally may not translate
into strong sales in Indonesia, in view of the high price range and underdeveloped EV
infrastructure. ASII has complete exposure to EV from hybrid (Corolla Cross, CHR, Camry,
Alphard) to full electric (Lexus EV), and Toyota plans to spend USD 2bn in developing EVs in
Indonesia. The new carbon-emission-based luxury tax (PPnBM) based on fuel efficiency
shows a strong commitment to EV development in Indonesia, with 0% tax for electric
vehicles (EV). In contrast, the PPnBM for ICE engine is at a minimum of 15% for non-LCGC,
and 3% for LCGC.
Maintain Buy on ASII. We reiterate our Buy recommendation on ASII with a higher TP of
Rp6,300/share based on SOTP valuation, with implied FY21F PE at 14.1x, on par with
historic avg. of 14.0x, and more upside risk on earnings from the recovery in automotive
units.

FIGURE 97. 4W RETAIL FIGURE 98. 4W WHOLESALE
Source: Gaikindo Source: Gaikindo
FIGURE 99. PE ASII FIGURE 100. PBV ASII
Source: Detik Oto Source: Bloomberg
FIGURE 101. NEW LUXURY GOODS SALES TAX (PPNBM)

Fuel Consumption (km/litre) Machine capacity
Type Categories Co2 (g/km)
Gasoline Diesel <1.5 | 1,5-3,0 >3,0
>15.5 >17.5 <150 15% 40%
15.4-11.6 17.4-13.1 151-200 20% 50%
< 10 people
11.5-9.3 13-10.5 201-250 25% 60%
Passenger Car
<9.3 <10.5 >250 40% 70%
>11.6 >13.1 <200 15% 25%
>10 people/minibus
<11.6 <13.1 >200 20% 30%
>15.5 >17.5 <150 10% 20%
Double cabin 15.5-11.6 17.4-13.1 150-200 12% 25%
Commercial Vehicle
<11.6 <13.1 >200 15% 30%
Truck, Bus, Pickup All type All type All type 0%
KBH2 (LCGC) 20 21.8 120 3%
>23 >26 <100 2%/8% 20%
Hybrid/mild hybrid 23-18.5 25.9-21 101-125 5%/10% 25%
Program
18.4-15.5 20.8-17.5 126-150 8%/12% 30%
Flexy engine (E100/B100) * * * 8%
PHEV, EV/FC All type All type All type 0%
Source: Bisnis Indonesia, MoF

Banking
Sector Rating: OVERWEIGHT
Analyst(s): Tjandra Lienandjaja/Silvony Gathrie/Kresna Hutabarat
Positive loan growth outlook, but still cautious. Industry loan growth recovery will
depend on the economy’s capacity to recover from the COVID-19 pandemic in 2021.
Despite positive developments in COVID-19 vaccines and therapies, we expect the
economic recovery progress to be gradual throughout 2021. Some industries will have
better capacity to recover from the pandemic faster than the others; for instance, we
expect construction, agriculture, mining, and transportation, warehousing &
communication industries to recover ahead of others, such as financial intermediaries,
wholesale & retail trade, and electricity, gas & water. Hence, we expect loan demand from
those leading industries to pick up faster in 2021 and lead the industry loan growth during
the year. Overall, we expect loan growth to reach 7% YoY in 2021, backed by nominal GDP
growth recovery from -0.3% YoY in 2020 to 7.0% YoY in 2021.
FIGURE 102. NOMINAL GDP VS INDUSTRY LOAN GROWTH VS FIGURE 103. NIM TRENDS
INDUSTRY DEPOSIT GROWTH
9.00%
35.0 Dec-19 Sep-20
30.0 8.00%
25.0 7.00%
20.0 6.00%
15.0 5.00%
10.0
4.00%
5.0
3.00%
-
2.00%
-5.0
BBRI
BBCA
BBNI
PNBN
BJBR
BJTM
BMRI
BTPN
BBTN
BNGA
BDMN
9M20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Nominal GDP growth Deposit growth Loan growth Banks - BUKU IV Banks - BUKU III
Source: OJK, Company Data, Mandiri Sekuritas Research Source: Company Data, Mandiri Sekuritas Research
Flush liquidity and prospect of lower cost of fund. The industry will likely continue
seeing ample liquidity, as deposit growth is expected to exceed loan growth in 2021. Banks
will remain selective in lending and prioritize asset quality over asset growth. Hence, LDR
will only improve marginally in 2021 versus 2020 and remain below the 2019 level, in our
view. The declining LDR, together with the lower benchmark rate and the higher
restructured loan balance, has led to NIM erosion across banks in 2020. But the flush
liquidity has increased the prospect of lower cost of fund, which together with LDR
improvement could support NIM recovery in 2021.
FIGURE 104. INDUSTRY LDR FIGURE 105. EXCESS FUNDS TO TOTAL ASSETS OF BUKU IV
BANKS
100.0 (% 31.0
90.0 29.0 30.1

80.0
27.0
70.0 Average: 25.4
60.0 25.0 25.7
24.8 24.8
50.0 23.0 24.2
40.0 22.5
21.0
30.0
19.0 20.2
20.0
10.0 17.0
-
15.0
9M20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
BBCA BMRI BBRI BNGA PNBN BBNI BDMN
Source: OJK, Mandiri Sekuritas Research Source: Company Data, Mandiri Sekuritas Research

Asset quality remains key focus for investors. BUKU-IV banks have only reported ~66
bps NPL rate deterioration between Dec-19 and Sep-20, despite the restructured loan
balance increase to ~23% of total loans on average in the same period. Similarly, BUKU-III
banks have only reported ~44 bps NPL rate deterioration between Dec-19 and Sep-20,
despite the restructured loan balance increase to ~14% of total loans on average in the
same period. The NPL pick-up will likely remain “limited” in 2021 as the government
extends the relaxation period for the loan restructuring program to 1Q22. However, NPL
pick-up will turn more meaningful in 2022, following the end of the loan restructuring
relaxation period. To note, under the current relaxation program, banks classified the
restructured loan balance as “performing” and hence excluded them from the current NPL
calculations.
Most banks, however, have taken conservative steps to set aside loan loss provisions for
potential deterioration of existing restructured loans into NPL over the next 12-24 months.
For instance, BUKU-IV banks have incurred 20-180 bps higher credit cost (annualized)
between Dec-19 and Sep-20 to prepare for NPL addition from the restructured loan pool.
We expect banks’ cost of credit to ease in 2021, given the preemptive provisioning in 2020,
but to remain above the pre-COVID-19 levels.
Asset quality improvement in 2021-22 will primarily depend on GDP growth reacceleration,
which relies on continued fiscal support for sectors most hit by the pandemic and the
economy’s success in materializing direct investments after the Job Creation Bill release in
Nov-20.
FIGURE 106. RESTRUCTURED LOAN BALANCE (9M20) FIGURE 107. COMPARISON OF NPL CHANGES
50.0 47.9 5.0%
Dec-19 Sep-20
40.0 4.0%
30.0 27.7 27.2 3.0%

25.4 24.1
22.1 20.9 20.6
20.0 15.9 2.0%
9.7
10.0 1.0%
4.4 2.7
- 0.0%
BMRI
BTPN
BBTN
BNGA
BBRI
BTPS
BDMN
BBCA
BBNI
PNBN
BJBR
BJTM
BBRI
BTPS
BBCA
BBNI
PNBN
BJBR
BNLI
BJTM
BMRI
BBTN
BNGA
BDMN
Banks - BUKU IV Banks - BUKU III Banks - BUKU IV Banks - BUKU III
Source: Company Data, Mandiri Sekuritas Research Source: Company Data, Mandiri Sekuritas Research
Fair likelihood of earnings recovery in 2021. Banks in our coverage have made
preemptive provisioning and have bulked-up coverage ratios in 2020. Hence, we expect
provision charges to decrease across banks in 2021, as banks will only have provision as
necessary and may see asset quality improvement on the back of general economic
recovery. Thus, the lower provision charges and the NIM recovery will be the primary
drivers for net profit growth turnaround in 2021.
Yet, we believe investors will continue to focus on the risk of restructured loans relapsing
into NPL in 2021-22. However, the current sector valuation is still attractive, given the
prospect of ROE recovery in 2021 and the forward valuation running below long-term
averages. We have an Overweight rating for the banking sector, with BBNI and BBTN as our
top picks.

FIGURE 108. COVERAGE RATIO FIGURE 109. Z-SCORE OF FORWARD PBV

1.50 Z-Score
300%
Dec-19 Sep-20 0.95
1.00
250%
0.50
200%
150% -
(0.06)
100% (0.50)
(0.57)
50% (1.00) (0.76) (0.68)
(1.04)
(1.15) (1.08) (1.08)
0% (1.50) (1.32)
BMRI
BTPN
BBTN
BNGA
BBRI
BDMN
BBCA
BBNI
PNBN
BJBR
BJTM
(2.00)
Banks - BUKU IV BDMN PNBN BNGA BTPN BBNI BJBR BJTM BBTN BBRI BBCA
Banks - BUKU III
Source: Note: PBV Z-scores are calculated based on means and standard
deviations dating back IPO dates (up to earliest data point availability).
Source: Bloomberg (close prices as of 4-Dec-20), Mandiri Sekuritas
Source: Company Data, Mandiri Sekuritas Research Research
Building Material

Analyst(s): Robin Sutanto
Rebound in domestic volumes, stable market share. We expect the industry to see
growth of 5% yoy in 2021F, in-line with GFCF growth expectations. Despite some 10% yoy
decline this year, we expect the rebound to pre-COVID levels to be gradual as 2021 should
still see some sluggishness from the pandemic. However, bag demand should remain
stable as the property market appears solid despite the pandemic, while infrastructure
budget allocation has grown 69% yoy. Domestic market share should also remain stable for
the incumbents, albeit with some choppiness earlier in the year, however should recover as
industry demand improves.
Pricing pressure exists, albeit not a downward spiral. Based on our pricing channel
check, retail prices have remained steady for the most part as price drops have been
immaterial and temporary despite East Java having seen a new competitor. This should
continue further ahead despite the expected entrance of another competitor in Central
Java. At this stage, the largest two incumbents would still own some 75% market share
between them, while qualitative aspects such distribution networks would be challenging
to acquire for new brands. We hence think domestic price pressure should remain under
control in 2021F, although ASP hikes are unlikely in 2021.
Cost efficiencies to continue. While ASP hikes is less certain, we expect the cost side to
continue softening for SMGR and INTP. For SMGR, we expect synergies from the merger to
continue, while for INTP the switch to low CV coal and alternative fuels will continue, while
both companies should continue with operating leverage improvement. We expect
EBITDA margin of around 23% for both counters in 2021. ODOL tightening has been
announced to begin in 2023 and risks of early tightening should be subdued due to
continued weak growth environment next year.
SMGR over INTP. At this stage, our preference tends towards SMGR over INTP, as INTP’s
discount to SMGR has reversed course and it is now the pricier counter on EV/ton basis.
SMGR’s largest geographic spread should render it better able to maintain cost efficiencies
going forward, notably when talks of ODOL implementation re-surface as conditions
normalize.

FIGURE 110. CEMENT INDUSTRY SUPPLY AND DEMAND TABLE

Supply and Demand Forecast
Indonesian Capacity (mn tons) 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F
Semen Gresik Group 27,700 29,500 29,500 29,500 35,500 35,500 35,500 35,500 35,500
Indocement 18,600 20,500 20,500 24,900 24,900 24,900 24,900 24,900 24,900
Semen Andalas 1,600 1,600 1,600 1,600 Merger with Holcim
Semen Baturaja 1,300 1,300 1,300 2,000 2,500 3,850 3,850 3,850 3,850
Lafarge Holcim Indonesia 10,400 12,100 12,100 12,100 14,500 15,500 15,500 15,500 15,500
Semen Bosowa Maros 6,000 6,000 6,000 6,000 7,400 7,400 7,400 7,400 7,400
Semen Kupang 300 300 300 300 400 400 400 400 400
Semen Merah Putih 4,000 7,690 7,690 8,070 9,570 9,570
Semen Jui Shin 1,800 1,800 1,800 1,800 1,800 1,800 1,800
Semen Panasia 1,800 1,800 1,800 1,800 1,800 1,800
Siam Cement 1,800 1,800 1,800 1,800 1,800 1,800
Anhui Conch 1,700 1,700 6,700 9,400 11,200 13,200 13,200
Semen Grobogan 5,000
Hongshi 2,500 2,500
Total Capacity 65,900 71,300 74,800 87,500 104,990 110,040 111,840 116,220 121,220
growth 14.4% 8.2% 4.9% 17.0% 20.0% 4.8% 1.6% 3.6% 4.3%
Demand Incl Exports (mn tons) 58,526 60,130 63,002 63,589 69,436 73,427 76,232 73,183 77,995
growth 6.1% 2.7% 4.8% 0.9% 9.2% 5.7% 3.8% -4.0% 6.6%
Utilization Rate Including Exports 88.8% 84.3% 84.2% 72.7% 66.7% 65.8% 67.9% 63.0% 64.3%
Excess Capacity (mn tons) 7,374 11,170 11,798 23,911 35,580 35,816 34,558 -9.5% 4.5%
Demand Forecast
Indonesian Capacity
2013 2014 2015 2016 2017 2018 2019 2020F 2021F
(000 tons)
Semen Gresik Group 25,450 26,156 25,969 25,682 27,092 27,421 26,819 23,815 24,887
Indocement 17,642 18,189 16,784 16,115 16,784 17,743 17,809 15,968 16,686
Lafarge Holcim Indonesia 8,431 8,756 8,635 9,427 9,686 10,634 10,422 9,258 9,675
Others 6,500 6,810 10,607 10,783 12,902 13,934 14,492 14,346 14,992
Total Domestic Demand 58,023 59,910 61,995 62,008 66,464 69,804 72,686 63,387 66,240
growth 5.6% 3.3% 3.5% 0.0% 7.2% 5.0% 4.1% -9.5% 4.5%
Exports 503 220 1,008 1,582 2,947 3,940 6,191 9,795 11,755
growth 164.0% -56.2% 357.4% 57.0% 86.3% 33.7% 57.1% 58.2% 20%
Total Demand 58,526 60,130 63,002 63,589 69,436 73,427 76,232 73,183 77,995
growth 6.1% 2.7% 4.8% 0.9% 9.2% 5.7% 3.8% -4.0% 6.6%
Bag 45,612 46,834 47,500 46,695 49,643 50,921 51,077 48,807 50,342
Bulk 12,393 13,072 14,495 15,257 16,847 18,567 18,915 14,579 15,898
Growth
Bag 3.4% 2.7% 1.4% -1.7% 6.3% 2.5% 4.0% 6.5% 3.1%
Bulk 15.1% 5.5% 10.9% 5.3% 10.4% 12.3% 4.5% 7.4% 9.0%
Composition
Bag 78.6% 78.2% 76.6% 75.4% 74.7% 72.9% 70.2% 77.0% 76.0%
Bulk 21.4% 21.8% 23.4% 24.6% 25.3% 27.1% 29.8% 23.0% 24.0%
Source: Bloomberg

Coal Mining

Stronger earnings outlook ahead. As coal prices have recovered from the Aug-20 low, we
see a stronger earnings outlook for next year from higher coal prices, driven by improving
demand from both export and domestic markets. Upside risks to seaborne coal prices may
come from 1) potential demand recovery from India and new import quota from China; 2)
production risk in 1Q21 due to La Nina, and; 3) slower production recovery in Indonesia. We
forecast coal price to recover to USD 70/ton in 2021-2022 from USD 60/ton in 2020. The
current sentiment on coal price has been strong, as the market anticipates recovery next
year.
Demand recovery from the export market next year. The global seaborne thermal coal
market is estimated to decline by 6% this year to 1.04bn tons due to weak demand amid
the pandemic. Demand from India is forecasted to decline by 15% YoY, while from China to
decline slightly by 2% YoY. India’s coal imports are forecasted to gradually recover to
180mn tons (+12% YoY), still below the 2019 level of 189mn tons due to the recovery in
power demand as industrial activities resume amid the pandemic. While China will focus
on clean energy, according to its 14th five-year plan, we believe coal will remain dominant
in its energy mix, at 57% by 2025 (vs. 57.7% in 2019), given its national concerns about
energy security and supply reliability. Thus, despite developing green energy, China’s coal
demand is expected to grow by around 2.5% CAGR. China uses coal import to stabilize its
domestic coal prices.
Lower supply from Indonesia amid weak demand from export market and low coal
prices, with prices below some miners’ production cost. Coal production in 9M20 dropped
to 413mn tons (-11% YoY) but still largely in-line with the government forecast of 550mn
tons. The decline in production mainly came from coal miners that produce coal with CV of
<4,000 kcal (GAR) due to high cost-structure and that generally sell their coal to the spot
market, with lack of exposure to long-term contracts. Meanwhile, PLN’s coal demand is
estimated to increase by 7% p.a. to 153mn tons in 2026, driven by rising electricity
generation, as PLN targets to increase power generation capacity by 77.9 GW for 2017-
2026, with around 40% to come from coal-fired power plants. Coal will continue to
dominate the national energy mix for electricity, at 50.4% of total, with the rest from LNG
(19.3%), hydro (12.3%), geothermal (9.0%), and gas (7.4%).
PTBA is our top pick. We prefer coal miners with strong production growth outlook, low
cost-structure, and healthy balance sheet with upside risk on dividend payment. Our top
pick is PTBA (Buy, Rp3,100 TP) for its strong production growth, driven by railway
transportation expansions, low cost-structure, and high exposure to the domestic market.
We also like ADRO (Buy, Rp1,750 TP) for its low cost-structure and attractive asset play,
given its exposure to large coking coal asset and power plant; and UNTR (Buy, Rp31,700TP),
as we anticipate margins recovery at Pama due to the recovery in coal prices. We reiterate
our Neutral call on ITMG (Neutral, Rp15,000 TP) and HRUM (Neutral, Rp3,000 TP), as we
think the market has largely priced in the potential earnings recovery from higher coal
price, given the strong share price rally in the past two months. Weak earnings should be
largely anticipated, and they seem to have bottomed in 2Q-3Q20, with more meaningful
recovery to start in 1Q21, driven by higher coal prices.

FIGURE 111. NEWCASTLE AND QHD COAL PRICES FIGURE 112. INDONESIA COAL INDICES
US$/Ton RMB/Ton USD/ton
140.0 900.0 90.0
120.0
800.0 80.0
700.0 70.0
100.0
600.0
60.0
80.0
50.0
500.0
40.0
400.0
60.0 30.0
300.0 20.0
40.0
200.0 10.0
20.0
100.0
-
Apr-12
Apr-17
Sep-12
Feb-13
Sep-17
Feb-18
Jun-11
Jun-16
Jul-13
Jul-18
Mar-15
Mar-20
Dec-13
Dec-18
Oct-14
Oct-19
Aug-15
Aug-20
Jan-11
Nov-11
Jan-16
Nov-16
May-14
May-19
0.0 0.0
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
ICI 4 (4,200kcal) ICI 3 (5,000kcal)
Newcaslte 6,300 GAR Indonesia HBA Qinhuangdao 5,500 NAR - RSH
FIGURE 113. TRADE

Annual Percentage Change
Unit 2019 2020 2021 2022
2020 2021 2022
World Trade Mt 1106 1043 1058 1078 -5.7% 1.4% 1.9%
Thermal Coal Imports
Asia Mt 847 808 837 858 -4.6% 3.6% 2.5%
China Mt 224 220 205 200 -1.7% -6.8% -2.4%
India Mt 189 160 180 185 -15.2% 12.2% 3.0%
Japan Mt 138 136 134 135 -1.8% -1.5% 0.7%
South Korea Mt 93 88 90 90 -5.9% 2.4% 0.0%
Taiwan Mt 61 58 57 57 -4.6% -1.2% -1.2%
Thermal Coal Exports
Indonesia Mt 449 404 422 423 -10.0% 4.5% 0.2%
Australia Mt 212 203 225 230 -4.3% 10.8% 2.3%
Russia Mt 181 173 179 184 -4.4% 3.7% 2.8%
Colombia Mt 69 55 68 75 -20.3% 23.6% 10.3%
South Africa Mt 79 69 74 77 -12.6% 6.5% 4.1%
United States Mt 34 20 22 24 -41.6% 10.1% 9.1%
Source: Office of the Chief Economist Australia
FIGURE 114. INDONESIA COAL PRODUCTION FIGURE 115. PROJECTED PLN COAL DEMAND
Mn Tons mn tons
700 180
610
160 148 151 153
600 549 550 145
138
500 474 458 461 472 140 127
434
412 402 120 111
381 392
400 353 345 364 356 99
344
287 295 100 85 89
300 73
80
200
115
138 60
86 90 97
66 67 72 76
100 40
0 20
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
0
Domestic Export Coal Production 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Source: Ministry of Energy and Mineral Resources, APBI, Mandiri

Sekuritas Source: PLN

Construction

Analyst(s): Edbert Surya/Adrian Joezer
Sovereign wealth fund initiative as game-changer. The government has set an initial
capital of USD 5.0bn, with a minimum cash capital of USD 1.0bn from state capital injection
for Indonesia’s first sovereign wealth fund initiative, the Nusantara Investment Authority
(NIA). At first, the NIA will primarily focus on infrastructure, particularly supporting SOEs’
asset recycling plan, with toll roads, airports, and seaports as the initial investment
opportunities. Its commercial operation is expected to start in 1Q21. Although the
investment structure’s technicalities have not been disclosed yet, the founding of the NIA
will benefit the overall construction sector, considering its objective to support SOEs’ asset
recycling and provide a new financing source for infrastructure projects. The SOE
contractors will thrive from the SWF set-up, particularly regarding project financing, as the
SWF will limit their balance-sheet usage. Meanwhile, WSKT will be the ultimate beneficiary
of the asset recycling plan, which will benefit WSKT IJ the most due to its highly leveraged
balance sheet and diverse toll road ownership.
Normalizing 2021 government infra budget. Following a major revision in the 2020
Outlook, the government has set a considerable 2021 infra budget of Rp414.0tn, implying a
47.3% increase from the 2020 Outlook (post-pandemic), while still 2.2% lower than 2020’s
initial budget. The government plans to centralize the budget to optimize spending, as the
Ministry of Public Works and Housing (PUPR)’s allocation rose by 98.1% YoY to Rp149.8tn,
the Ministry of Transportation (MoT)’s budget jumped by 39.8% YoY to Rp45.7tn, and the
land clearing budget for strategic infrastructure projects (LMAN) got an Rp11.1tn budget
allocation after nil in the 2020 budget. We think the 2021 infrastructure budget is
considerably positive for the construction sector, indicating potentially higher new
contracts than the low-base 2020.
Key risks: shortage in 2020 new contracts and limited capex spending in 2021. The big
4 SOE contractors’ relatively subdued 10M20 new contracts at Rp45.7tn (-45% YoY) exposes
the downside risk of a revenue decline in 2021, considering the thin order book on hand.
Meanwhile, we expect the 2021 new contracts will still be 15-20% below the 2019 level, as
project owners, such as the airport operator (Angkasa Pura), have not fully recovered,
limiting the potential capex from SOE companies and the private segment.
WSKT is our top pick in the construction sector. WSKT is the main beneficiary of the NIA
initiative, with the potential to deleverage its balance sheet and unlock its asset ownership
value through asset recycling, which has been long ignored by the market.
FIGURE 116. INFRASTRUCTURE STATE BUDGET 2014-2021

2014 2015 2016 2017 2018 2019 2020 2021
Realization Realization APBNP Outlook APBN Outlook APBN Outlook RAPBN
1. Ministrial Spending 118.6 170.3 151.2 146.9 161.3 144.8 170.0 140.1 236.3
Ministry of Public Works and Housing 69.3 107.4 94.7 100.0 104.7 97.0 117.2 75.6 149.8
Ministry of Public Housing
Ministry of Transportation 26.2 44.4 39.9 33.5 44.2 35.8 39.1 32.7 45.7
2. Transfer to Region and Village Fund 14.4 39.1 88.0 178.6 184.1 192.4 200.3 112.5 131.9
Special Allocation Fund 11.9 27.7 66.3 30.6 33.9 31.8 32.7 14.4 26.1
Village Infrastructure Fund - 8.3 18.8 23.3 24.0 27.9 28.8 28.5 28.8
General Fund for Infrastructure - - - 121.2 122.1 128.4 130.3 61.7 69.4
Special autonomy infrastructure 2.5
3. Payment Funding 9.0 34.1 62.1 46.2 48.0 45.0 31.8 28.5 45.8
State Capital Injection 4.0 28.8 36.2 9.6 6.1 17.8 17.7 18.9 17.4
BLU LMAN - - 16.0 32.1 35.4 22.0 10.5 - 11.1
Total 154.6 256.3 317.1 388.3 410.4 399.7 423.3 281.1 414.0
Source: Ministry of Finance

FIGURE 117. INFRA SPENDING TO TOTAL BUDGET FIGURE 118. INFRA SPENDING TO TOTAL GDP
(IDRtn) (IDRtn)
450 18.8% 18.5% 20.0% 450 3.5%
17.1% 16.7% 3.0%
400 18.0% 400 2.8%
15.1% 3.0%
350 14.2% 14.4% 16.0% 350 2.5% 2.4% 2.3%
14.0% 2.2% 2.2% 2.5%
300 300
10.3% 12.0% 2.0%
250 250 1.7%
8.7% 10.0% 1.5%
200 200 1.5%
8.0%
150 150
6.0% 1.0%
100 4.0% 100
0.5%
50 2.0% 50
0 0.0% 0 0.0%
Actual Actual Actual APBNP APBN Outlook APBN Outlook RAPBN Actual Actual Actual APBNP APBN Outlook APBN Outlook RAPBN
2014 2015 2016 2017 2018 2019 2020 2020 2021 2014 2015 2016 2017 2018 2019 2020 2020 2021
Infrastructure spending (IDR tn) % Total budget Infrastructure spending (IDR tn) % Total GDP
Source: Ministry of Finance, Mandiri Sekuritas Source: Ministry of Finance, Mandiri Sekuritas
FIGURE 119. BIG 4 SOE CONTRACTORS NEW ORDER BOOK FIGURE 120. SOE CONTRACTORS’ ORDER BACKLOG
Source: Ministry of Finance, Mandiri Sekuritas Source: Ministry of Finance, Mandiri Sekuritas
Consumer Staples

Analyst(s): Adrian Joezer/Lakshmi Rowter/Riyanto Hartanto
FMCG spending normalization in 2021. As vaccine developments are improving

customers’ confidence, we expect the allocation for discretionary spending to gradually
recover at the expense of FMCG (the opposite had helped FMCG in 1H20). While the
Government’s commitment to restore purchasing power could extend the subsidy and
social assistance into 2021, the figure normalizes from the high base in 2020, particularly
the social safety net stimulus under PEN which declines from Rp234.3trn in 2020 to
Rp110.2trn in 2021. Therefore, we expect the overall FMCG spending to normalize
considering the less cushion for low-end customers and a shift in spending towards
discretionary for mid-upper customers. A trend decoupling across FMCG subcategories
could also continue, e.g. hygiene-related products may grow faster than others from the
higher health awareness, while the growth of in-home products may lose steam.
The announced 2021 tobacco excise tariff will set another tough year for Tobacco. The
good thing is that the government still increased the HJE (retail price floor) but enforcing
this is the key. Without HJE enforcement, we think 2021 will be very tough for tobacco
producers, as there will be less incentives to pass on 2020-21 excise tariffs given the weak
purchasing power.

Importance of supply chain. Distribution channel optimization will be a crucial strategy

for a sustained revenue growth across target segments; this includes raising the volume
toward online and O2O channels to tap the resilient mid-upper customers. Some are well
positioned to monetize the trend with their strong cooperation with e-commerce and B2B
platforms, including Unilever with its SahabatWarung and MYOR with its intense official
store presence. We also expect a shelf consolidation at MT outlets as the fragile purchasing
power would require MT to stock up reliable and fast-moving SKUs, catering less to the
customer appetite for tail products; this would benefit larger FMCGs with stronger brands.
Meanwhile, we expect GT channels to remain relevant for the mid-low target market with a
room of improvement in its supply-chain fulfillment.
Key risk: margin deterioration from soaring soft commodities prices. Stronger soft
commodity prices could lend a near-term support to the grassroots’ purchasing power,
particularly CPO. However, with the risk of down-trading for the mass market, the effective
result could create margin pressures (from wheat, skimmed milk powder, sugar, and coffee)
within the non-tobacco FMCG producers.
Our preferences. UNVR, ICBP, MYOR are our most preferred names, due to their multi-tier
product offering, flagship brands, and advanced innovation in the changing distribution
landscape. We also have Buy ratings on INDF, SIDO, and MLBI. While we have Buy ratings on
tobacco names, we have lack of convictions on the catalysts unless HJE enforcement
certainty is there.
Healthcare

Analyst(s): Inggrid Gondoprastowo/Adrian Joezer
COVID-19 business may stay for a while, but even without that, result would still be
robust. Given the government’s latest COVID-19 vaccination roadmap, >75% of the public
may only start receiving the shot by 2H21, as the 1H21 allocation will be prioritized for
front-line medical workers and public servants. Therefore, we believe the high-ticket
business from COVID-19 treatment may sustain at least until 1H21 before gradually
decreasing in 2H21. Meanwhile, we expect the COVID-19 testing business, as a
complementary to vaccination, may be more resilient in 2021. Note that COVID-19
treatment costs on average c. Rp49mn/patient vs. a hospital’s average revenue/inpatient of
Rp7mn-17mn. For comparison, testing costs Rp900k/test for RT-PCR and Rp150k/test for
rapid test vs. a hospital’s average revenue/outpatient of Rp200k-950k.
On a very conservative note, based on the assumptions that non-COVID-19 patients remain
at 80% of the normal level for 1H21, that recovery occurs in 2H21 (+10% of normal), and
ASP increases by 5%, the core business of a hospital without COVID-19 contribution can
provide +5-10% YoY revenue growth in 2021F (See Fig. 1-3). Whereas, assuming COVID-19
treatment and testing businesses persist in 2021F, albeit at diminishing amounts, aligned
with vaccine timeline expectation, we expect revenues for hospitals can still grow by 20-
30% YoY in 2021F.
Faster BPJS Kesehatan payment to ease working capital. Hospitals have seen faster
BPJS Kesehatan payments after the premium increase this year (Presidential Regulation
64/2020), which—coupled with lower hospital traffic during the pandemic—has led the
BPJS Kesehatan into a surplus territory. Reportedly, BPJS Kesehatan has shortened its
payment cycle to hospitals from previously 100 days to currently 60 days, similar to private
insurance. We believe this short cycle will persist even after hospital traffic recovers,
considering the BPJS Kesehatan has healthier financials with the new higher premium and
is committed to maintaining it with the future standard class policy. We believe faster BPJS
Kesehatan payment will release working capital pressure for hospitals going forward.

BPJS Kesehatan standard policy to bring back profitable segment. The BPJS is
currently finalizing the standard class policy meant to be implemented by 2022. The
standard class’ preliminary design revealed that BPJS members would be categorized into
only two classes (A and B) from previously three (See Fig. 5). Class A will be for the subsidy
group, with 6 beds/room, equal to Class 3 in hospitals, and Class B will be for voluntary and
employee members, with 4 beds/room, equal to Class 2. BPJS will also make some revisions
in its policies on premium and INA-CBG (BPJS diagnostic rates) in 2021 to accommodate
the standard class policy. We believe the lower room/class benefit after the standard class
implementation will drive the behavior of the middle and middle-up BPJS members to
access healthcare with private insurance or out-of-pocket. Therefore, after the policy
implementation, we expect higher traffic in the private patient segment, which is more
profitable for hospitals.
Key downside risks for the hospital sector are lower government reimbursement rate for
COVID-19 treatment, COVID-19 vaccine delay, and cancellation of the standard class policy.
In contrast, the key upside risk is the new revenue stream from COVID-19 vaccination,
whose magnitude is largely unknown and has not been priced in by the market.
We prefer MIKA and HEAL for our top-picks. MIKA will be the main beneficiary of the
standard class policy, as its private patient contribution is still >85% of revenue. While for
HEAL, we see its valuation is undemanding, at 15.6x EV/EBITDA 12MF (-0.5 SD), still below
the ASEAN peers at 18x, and it has more potential upsides with the ongoing efficiency plan.
FIGURE 121. MIKA 2021F REVENUE BREAKDOWN FIGURE 122. SILO 2021F REVENUE BREAKDOWN
Source: Company, Mandiri Sekuritas Source: Company, Mandiri Sekuritas
FIGURE 123. HEAL 2021F REVENUE BREAKDOWN FIGURE 124. TRADE RECEIVABLE DAYS TREND
Source: Company, Mandiri Sekuritas Source: Company, Mandiri Sekuritas

FIGURE 125. BPJS KESEHATAN STANDARD CLASS POLICY
Source: Ministry of Health, Mandiri Sekuritas
Mining
Indonesia’s nickel sector is changing rapidly; more to come. The nickel industry
dynamics have changed after Indonesia surprisingly implemented the first nickel ore
export ban in 2014, leading to a “migration” of Chinese NPI players to Indonesia (Morowali)
to secure nickel ore supply, the key ingredient to produce NPI. Indonesia’s nickel
production has increased by almost fourfold within only 4 years, from only 100k tons in
2015 to around 480k tons in 2019. ANTM and INCO’s combined market share in Indonesia’s
nickel production declined to 19% in 2019 from almost 100% in 2015. The Ministry of
Energy and Mineral Resources (ESDM) forecasts Indonesia’s nickel production to increase to
around 1.1mn tons by 2024 or around 18% CAGR, driven by growing NPI production.
However, class I nickel’s share for battery is forecasted to remain small at 20% of total
production despite the abundance of limonite ore reserves for battery. Indonesia
accounted for 19% of the global refined nickel production in 2019; this number will
increase to almost 40% by 2024.
Nickel is still a stainless-steel play, at least for now. While the most exciting story about
nickel will come from battery, 70% of today’s nickel market is dominated by stainless steel,
whereas battery is around 5% of the demand. Thus, the volatility of nickel price will still be
driven by the stainless steel market, primarily in China, the sole growth driver of global
stainless steel production, with a 50% market share. Global stainless steel production is
estimated to decline by 8% to 47.2mn tons, reflecting double-digit declines in other
developed countries, while China’s decline is estimated at less than 4% from last year.
ANTM is our only buy call amid strong earnings contribution from gold. While we
think there is still upside risk to nickel price from weak USD, the nickel industry
fundamentals remain unchanged; the nickel market is oversupplied. Norilsk Nickel
forecasts nickel supply to exceed demand by 148k tons this year, after 4 straight years of
deficits since 2016, and to still have a surplus of 100k tons in 2022, driven by growing NPI
supply from Indonesia, which has been largely uninterrupted by the pandemic. Recovery in
nickel demand next year (in-line with recovery in global stainless steel production) and the

scale of NPI expansions in Indonesia are the key issues to determine nickel price direction,
in our view. ANTM (Buy, Rp1,300 TP) is our only buy call on the sector due to its strong
earnings contribution from gold, and we maintain our Neutral call on INCO (Neutral,
Rp4,000 TP) due to weaker earnings next year, as the company will undergo up to 5
months of maintenance.
FIGURE 126. NICKEL MARKET AT A SURPLUS SINCE 2020 FIGURE 127. NICKEL BALANCE VS AVG NICKEL PRICE
Source: Norilsk Nickel, INSG Source: Norilsk Nickel, INSG, Bloomberg, Mandiri Sekuritas
FIGURE 128. GLOBAL NICKEL DEMAND RECOVERY WILL DEPEND ON THE FIGURE 129. GLOBAL NICKEL SUPPLY WILL BE DRIVEN BY PRODUCTION
PANDEMIC RAMP-UP OF NPI IN INDONESIA
Source: Ministry of ESDM Source: Ministry of ESDM
FIGURE 130. GLOBAL STAINLESS STEEL PRODUCTION FIGURE 131. STAINLESS STEEL PRODUCTION SEVERELY IMPACTED BY
COVID-19
Source: ISSF stainless steel Source: ISSF stainless steel

Media

Analyst(s): Kresna Hutabarat/Henry Tedja
We expect both SCMA and MNCN to generate high single-digit to low-teens revenue
growth in 2021F, backed by improving economic outlook and more contribution from
digital revenues. The government’s commitment to provide financial aid next year will
cushion the lower-income segment. Meanwhile, rising commodity prices (i.e., for coal and
CPO) will support consumers’ purchasing power in ex-Java areas. This will trigger FMCG
companies to increase their A&P budget next year. We also think the advertisement
demand from startup companies will recover next year, especially after collecting another
round of funding.
With all-new digital initiatives, we think both MNCN and SCMA will see higher revenue
contribution from their digital business. For instance, MNCN has secured a multi-channel
network agreement with Facebook and TikTok in 2H20 and should book the full benefit
next year. This agreement is better than with YouTube, as it provides a minimum
guarantee. Meanwhile, RCTI+ has also transformed into a super-app after integrating
several features, such as news, games, exclusive talent search, UGC, radio, etc. This will help
the company generate MAUs and increase its rate card for digital slots. In comparison,
SCMA through Vidio.com continues to expand its subscriber base, though we think the
platform will continue to book net loss in 2021F. However, we think Vidio.com could
challenge global OTT platforms, given its competitive advantages, such as a strong
production house, cheaper package prices, and lower data consumption. We think this
platform can help SCMA get a valuation rerating in the future.
Nevertheless, we also highlight potential downside risks from analog switch-off (ASO). We
think ASO could change the competition landscape of the FTA TV industry in Indonesia
through a lower entry barrier. Available slots in select regions will increase significantly
with ASO, and we think this could change the current audience share. To note, Nielsen
conducts regular measurements on TV ratings and audience shares in 11 cities, which
currently have limited slots available for additional FTA TV players. However, we highlight
that the TV rating battle is determined by TV programs, and so far, no other major media
groups have strong production houses as MNCN and SCMA do. Therefore, we think the
negative impact still manageable for both companies.
FIGURE 132. PRIME-TIME AUDIENCE SHARES FIGURE 133. NON-PRIME-TIME AUDIENCE SHARES
100.0 100.0
90.0 90.0
80.0 80.0
70.0 70.0
60.0 60.0
35.3 36.2 34.8 33.0 31.5 30.4 30.8 30.7 33.2 30.3
50.0 33.0 35.5 50.0 31.6 30.8 30.4 31.0 32.1 33.6 32.1
31.2 30.7 33.6
40.0 40.0
30.0 30.0
20.0 37.2 35.2 36.1 35.7 36.4 20.0 35.5
33.1 33.2 34.3 33.4 32.3 34.0 30.8 31.2 29.7 31.6 33.3 33.4 31.8 32.1 33.0 33.4
10.0 10.0
- -
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
MNCN SCMA VIVA Others MNCN SCMA VIVA Others
Source: Nielsen, Surya Citra Media, Mandiri Sekuritas Research estimates Source: Nielsen, Surya Citra Media, Mandiri Sekuritas Research estimates

Oil and Gas

Analyst(s): Henry Tedja/Adrian Joezer
Natural gas demand will recover, backed by improving economic outlook, although we
think the demand needs additional 3-6 months to return to the pre-COVID-19 level.
However, we also highlight the potential gas demand from PLN’s gasification projects. To
note, PLN plans to convert 52 diesel-fired power plants into gas-fired power plants in the
next two years, or by 1Q21 at the latest, as stipulated in the Ministerial Decree of MEMR.
These projects could provide additional gas demand of up to 167 BBTUD. Gas distributor
companies could also benefit from rising foreign direct investment in Indonesia. Plant
investment in industrial estates within Java area could help distributor companies see gas
demand increase, and we think PGAS will benefit more, given its vast pipeline network
across Java and Sumatra.
Improving crude oil price outlook will also benefit upstream contractors. This could help
contractors increase oil and gas lifting and hence improve their profitability. In addition, we
think the assets impairment will be limited in the future, as companies have significantly
reduced their long-term oil price assumptions. We also highlight potential incentives from
the government for the oil and gas industry; we think they could help the industry face the
“triple shock” (i.e., sluggish demand, low oil price, and foreign exchange volatility).
On the downside risks, we highlight the potential extension of the new gas price at
USD 6/MMBTU to all industries, on top of 7 industries and power sectors, as stipulated in
the Presidential Decree and the Ministerial Decree of MEMR. This will lead to distribution
spread and ROE decline, though we think the implementation will not materialize in 1H21,
in view of the requirement to revise previous regulations and negotiations with upstream
contractors, gas distributor companies, and the Ministry of Finance.
FIGURE 134. PGAS: DISTRIBUTION VOLUME TREND FIGURE 135. CRUDE OIL PRICE AND USD/IDR TREND
1,200 100 17,000
80 16,500
1,100 16,000
60
1,000 15,500
40 15,000
900 20 14,500
0 14,000
800 13,500
-20
700 13,000
-40 12,500
600 -60 12,000
Mar-17
Mar-20
Jul-15
Feb-16
May-16
Jul-18
May-19
Feb-20
Sep-17
Sep-20
Oct-15
Oct-18
Jun-17
Jun-20
May-19
Jul-19
Feb-20
May-20
Jul-20
Nov-16
Nov-19
Sep-19
Sep-20
Oct-19
Oct-20
Jun-19
Jun-20
Jan-15
Apr-15
Apr-18
Jan-19
Dec-17
Dec-20
Nov-19
Aug-16
Aug-19
Apr-19
Jan-20
Apr-20
Dec-19
Aug-19
Aug-20
PGAS Distribution Volume (BBTUD) WTI Price (USD/bbl) USD/IDR
Source: Company Data Source: Bloomberg

Poultry

Analyst(s): Riyanto Hartanto/Adrian Joezer
More stability on broiler and DOC prices ahead. We see high possibilities of more stable
broiler and DOC prices next year due to a deceleration of grandparent stock (GPS) import
quota realization in 2019-20 and a more transparent approach to culling regulations. The
2019 GPS import quota was flat YoY, while the 2020 realization is on track to reach 635k
chicks (-10.2% YoY). Given the 50-60 weeks of production time needed between GPS and
DOC final stock (FS), this decline in GPS import quota for 2 consecutive years should lower
FS supply in 2021. Further, continuous support from the government to stabilize the supply
and demand by enacting more transparent culling regulations, stricter supervision, and
projection of oversupply numbers by the Ministry of Agriculture should be more effective
in supporting prices.
Demand support from continuous social safety net and protein downtrading. The
COVID-19 pandemic contributed to the decline in overall broiler demand in 2020,
especially among mid-low income segments, given the weakening purchasing power. In
2021, the government will continue distributing five key social safety net stimulus
packages to revive consumption in general. We continue to see that recovery in poultry
demand at the grassroots level will be supported by three key social safety net programs:
the conditional cash transfer (PKH), basic food card (sembako card), and cash transfer.
Additionally, soaring beef price on top of income pressure will result in protein substitution
from beef to poultry. With a per capita consumption of 2.63 kg and 62.2% of beef
consumed by the mid-low income segment, which is heavily affected by the pandemic, we
estimate an additional yearly broiler demand of 109mn-122mn, based on the 2019
number. These numbers roughly account for one month of additional poultry demand
during the feeble period.
Risks on margins: high-bases of corn and soybean prices. Low corn prices have helped
poultry integrators’ profitability in 9M20, with the feed segment booking all-time high
margins. The recovery of broiler and DOC prices will result in the return of independent
farmers, which will bring higher demand for corn in 2021. Simultaneously, the USDA has
indicated a production decline in major soybean-producing areas within the US in 4Q20-
1H21 due to dry weather. Based on these factors, local corn and soybean meal prices are
bound to continue rising in 2021. Regardless, we see that poultry integrators are more
prepared to face these issues, given their heavy investment in corn dryers and silos since
2016.
Top pick. We believe the better demand and supply landscape will be enough to offset the
risks of higher corn and soybean meal prices. Our top pick for the poultry sector is JPFA,
thanks to its enticing valuation compared to the market leader, CPIN. Simultaneously, with
the expected broiler price recovery in 2021, JPFA has the highest exposure to the breeding
segment compared to CPIN and MAIN.

FIGURE 136. GPS IMPORT QUOTA REALIZATION TREND FIGURE 137. RETAIL BROILER AND BEEF PRICE DIFFERENCE
25,0% 800 135
20,0% 700 115

15,0% 600 95
10,0% 500
75
5,0% 400
55
0,0% 300
35
-5,0% 200
15
-10,0% 100
Nov - 06
Nov - 08
Nov - 10
Nov - 12
Nov - 14
Nov - 16
Nov - 18
Jul - 07
Jul - 09
Jul - 11
Jul - 13
Jul - 15
Jul - 17
Jul - 19
Mar - 08
Mar - 10
Mar - 12
Mar - 14
Mar - 16
Mar - 18
Mar - 20
-15,0% 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F
Broiler Beef Difference
GPS import quota (th birds) GPS import YoY - LHS
Source: Ministry of Agriculture, Mandiri Sekuritas estimates Source: CEIC
FIGURE 138. ADDITIONAL IMPACT OF BEEF DOWNTRADING ON CHICKEN CONSUMPTION

Per capita (kg) Nationwide (ton)
2019 beef consumption 2.63 686,270
Upper-middle Mid-low
Beef consumption by income segment 37.8% 62.2%
Total beef consumption (ton) 259,401 426,869
Beef substitution in mid-low segment Expensive Rare supply

Preference for poultry 41.0% 45.6%
Yearly additional demand for poultry (ton) 175,144 194,652
Yearly additional demand for poultry (mn broiler) 109 122
Source: Ministry of Agriculture survey, BPS, Mandiri Sekuritas estimates
FIGURE 139. LOCAL CORN PRICE TREND FIGURE 140. SOYBEAN MEAL PRICE TREND
3% 4.400 430 50,0%
2% 410 40,0%
4.200
1%
4.000 390 30,0%
0%
-1% 370 20,0%
3.800
-2% 350 10,0%
-3% 3.600
330 0,0%
-4% 3.400
-5% 310 -10,0%
3.200
-6% 290 -20,0%
-7% 3.000 270 -30,0%
Aug-19
Aug-20
Jan-20
Apr-20
Nov-19
May-20
Feb-20
Mar-20
Dec-19
Jul-19
Jul-20
Oct-19
Oct-20
Jun-20
Sep-19
Sep-20
250 -40,0%
Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Local corn price % MoM - lhs Soybean meal price % yoy - RHS
Source: Ministry of Agriculture, Mandiri Sekuritas Source: Bloomberg

FIGURE 141. SEPTEMBER–NOVEMBER 2020 CULLING PROGRAMS

Date Cull target Population target Commencement date Total culling (mn birds)
09-Sep-20 Internal live bird absorption 19.8
09-Sep-20 Buyback program 23.2mn/week Sep-20 97.4
09-Sep-20 FS HE 19 days in Java 7mn Completion of Aug-20 regulation 4.6
09-Sep-20 FS HE 19 days nationwide 6.4mn/week 9 - 30 Sep-20 19.2
09-Sep-20 CSR FS HE 7.5mn/week 30.0
09-Sep-20 PS > 50 weeks 1mn Sep-20 1.3
18-Sep-20 CSR FS HE 36mn/week 20 Sep - 17 Oct-20 143.9
18-Sep-20 FS HE 19 days 16.5mn/week 19 Sep - 20 Oct-20 65.9
18-Sep-20 Buyback program Sep-20 15.1
18-Sep-20 PS > 50 weeks in Java 2.2mn 19 - 26 Sep-20 2.9
18-Sep-20 PS > 50 weeks in ex-Java 1mn 19 - 26 Sep-20 1.3
19-Oct-20 FS HE 19 days 12.1mn/week 19 Oct - 21 Nov-20 60.5
19-Oct-20 FS HE 19 days Completion of Aug - Oct regulation 13.3
19-Oct-20 Buyback program Completion of Aug - Oct regulation 28.4
19-Oct-20 PS > 50 weeks in Java Completion of Oct regulation 1.2
19-Oct-20 PS > 50 weeks in ex-Java Completion of Oct regulation 0.3
Source: Ministry of Agriculture, Mandiri Sekuritas estimates
Property & Industrial Estate
Sector Rating: OVERWEIGHT (Property); OVERWEIGHT (Industrial Estate)

Analyst(s): Robin Sutanto
Residentials – supportive fundamentals and sentiment. Sales performance has been

resilient in 2020 amid the monumental challenges, beating expectations due to project
portfolios at the right price point and apt marketing strategies. We expect this to continue
over the medium term as the IDR 1.5bn/unit price point seems to cast the widest net in the
trade-off between affordability and scale. Developers should continue tapping into this
segment offering smaller landed housing units in satellite towns while offering ease of
payment terms in allowing down payment installments on mortgages as well as marketing
stunts such as free furnishing to entice buyers. The lower interest environment should
provide further tailwind. In light of the above, developers with stronger project portfolios
with larger land banks such as BSDE should continue to lead the way.
Recurring income to remain stunted partially into 2021. Rental discounts currently
apply at 50% of blended rental rates across mall developers and we expect this to continue
into 2021 as conditions on the ground will take time to recover to pre-COVID levels of
activity. As discounts are broadly based on footfall, and there is an Industrial Ministry
regulation capping footfall at 50% of capacity, we expect such a discount level to continue,
conservatively, until 8M21. Following this however we expect quicker recovery rates, and
we see developers under our coverage, notably PWON, to be solid recovery proxies as
majority have shifted tenancy mix away from retail and toward lifestyle tenants.

FIGURE 142. PROPERTY – PREFERENCE TABLE

DMAS PWON CTRA SMRA BSDE JRPT ASRI LPKR BEST
Preference order Highest Lowest
Stock Rating Buy Buy Buy Buy Buy Buy Buy Neutral Neutral
Mkt. Cap (USDmn) 11,953 26,247 17,261 11,613 23,394 7,838 5,109 16,590 1,420
Current Price (IDR) 248 545 930 805 1,105 570 260 234 206
Target (IDR) 300 700 1,120 960 1,160 670 210 200 130
Upside (%) 21.0% 28.4% 20.4% 19.3% 5.0% 17.5% -19.2% -14.5% -36.9%
Total NAVPS 510 1,260 4,332 3,543 4,230 4,417 1,620 749 723
Discount to NAV - current 51.4% 56.7% 78.5% 77.3% 73.9% 87.1% 84.0% 68.8% 71.5%
Discount to NAV - at PT 41.2% 44.4% 74.1% 72.9% 72.6% 84.8% 87.0% 73.3% 82.0%
Discount to NAV - 8 yr mean 63.0% 47.0% 72.0% 67.0% 66.0% 84.0% 79.0% 70.0% 43.0%
PBV 2020F (x) 189 668 1,213 1,169 1,438 707 340 225 412
PBV 2021F (x) -23.9% 22.5% 30.4% 45.2% 30.2% 24.0% 30.8% -4.0% 100.1%
PER 2020F (x) 1.7 1.7 1.1 1.5 0.7 1.0 0.5 0.6 0.4
PER 2021F (x) 1.7 1.5 1.0 1.4 0.7 0.9 0.5 0.6 0.4
Net gearing 2020F (%) 8.3 26.1 20.7 27.8 16.7 7.8 123.8 222.9 18.6
Net gearing 2021F (%) 10.8 14.9 15.8 19.2 11.4 7.4 7.5 42.2 16.3
FIGURE 143. EX-BULK PRESALES QUARTERLY TREND

Outlier effect in Oct 15
(IDRbn) from CTRA's Northwest
(Sby), Losari (Mks)
9,000 Rebound; last legs
of property boom
LTV tightening,
election
anticipation Aug 18: BI
8,000 Start of
rate cut announces
trend further LTV
relaxation, per
7,000 Start of current
rate hike
Aug 16: trend
Election,
6,000 BI relaxes
LTV rules festive
period,
school
5,000 Luxury holidays
tax scare COVID
impact,
4,000 festive
season
3,000
2,000
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20F
Source: Company, Mandiri Sekuritas estimates
Industrial estates pricey but worthy investment proxy. Industrial estate names have
recovered meaningfully from the slump in early 2020, however they remain the best
proxies to the government’s FDI push. In terms of fundamental performance, DMAS
outperformed peers by a significant degree in 2020, aided by structurally sound
operational profile from its massive, contiguous land bank at lower ASPs. Additionally, we
remain positive on demand in the Cikarang area relative to other areas further east, as
demonstrated by DMAS’ strong performance even amid the government’s push to
promote free leases on upcoming Central Javanese industrial estates. We hence think
Cikarang and Central Java could attract different portions of the FDI pie, with larger
investments continuing to favour Cikarang for its supply chain and proximity to main
markets, while Central Java benefits from lower labour and free land cost, which could
impinge on demand in existing Central Java industrial estates operated by peers such as
KIJA and DILD. Despite another solid year of presales, DMAS’ inquiries level remains well-
supported heading into 2021. BEST, conversely, we think its scattered land profile at high
land price should continue to pose challenges for the company in 2021.

FIGURE 144. INDUSTRIAL PRESALES VS ENQUIRIES

9M20 Realisation
Inquiries (ha) 2020 Target Presales_Actual (IDR)
Company 9M19 9M20 IDRbn Ha IDRbn Ha %
BEST 94 75 450 10-15 0 0 0%
DMAS 150 127 2,000 80 1,383 67.7 69%
SSIA 30 30 500 30 45 3 9%
Source: Bloomberg
Top picks – PWON, BSDE. We favour PWON and BSDE among other property names, the
former for its recovery proxy profile as recovery towards pre-COVID situation continues,
and the latter for its strong project portfolio placing it as presales leader.
Retail

Analyst(s): Lakshmi Rowter/Inggrid Gondoprastowo/Adrian Joezer
COVID-19 may stay for a while, remain cautiously optimistic. We believe there are two
important things to watch on COVID-19, i.e., another lockdown and the vaccine timeline.
While waiting for the public’s turn to receive the COVID-19 vaccine—which will be in 2Q21
at the earliest, according to the latest government roadmap—we expect certain
social/public limitations may still be imposed to control the virus spread at least until 1H21.
Meaningful recovery for retailers may start after that. Therefore, we based our pick on the
below filters to anticipate ups and downs until vaccine and recovery:
− Avoid heavy dependency on Eid festive season. Considering >75% of the public
may only be vaccinated in 2H21, we believe the Eid festive season in 2Q21 will be
weak again. We expect the recovery to remain slow, with sales still c. 70-80% of
normal level by 2Q21, slightly above the current recovery pace. RALS and LPPF
were the two retailers that heavily rely on Eid to drive their sales (2Q: >40% of FY
sales) and EBIT (2Q: 98%/6%% of FY EBIT). Meanwhile, ACES/MAPA/MAPI have
larger sales proportions in 4Q, driven by Christmas/New Year festive seasons.
− Seek business models that are most resilient and that recover better.
Benchmarking to global retailers, we found that home furnishing & improvements
and sporting goods stores have more resilient sales amid the COVID-19 pandemic,
whereas department stores were among the worst hit, which may have
exacerbated the challenge of competition from e-commerce in the past years. The
spending index released by Bank Mandiri also suggested that spending recovery
in retail has returned to the pre-pandemic level, while department stores lagged,
with its spending halved from normal as of Oct-20. Given these trends, we favor
ACES and MAPI, which have shown sales resiliency and faster recovery vs. peers,
and we avoid pure department-store play, such as RALS and LPPF.
− Stay with middle-up target market. Spending tracking by Bank Mandiri showed
that high- and middle-income groups’ spending recovered close to 90% of normal
as per Oct-20, whereas low-income group’s spending recovery has been stagnant
since reopening, at <80% of normal. The recovery trajectory may be
understandable, as the middle-low- and low-income segments experienced salary
cuts and job losses the most, according to data from Statistics Indonesia.
Therefore, we prefer retailers that cater middle-up segments, such as ACES, MAPA,
MAPI, as these segments’ purchasing power is less impacted by COVID-19 and
their recovery may likely be swifter.

Rigorous cost efficiencies led to quicker turnaround. Based on our observations,

retailers did efficiencies during the COVID-19 pandemic to mitigate falling sales, largely in
rental and salary expenses. Our sensitivity calculation revealed that LPPF/RALS/MAPI might
see the highest earnings recovery when sales recover due to massive cost-cutting in 9M20.
We expect LPPF/RALS/MAPI overall to have 15-25% lower opex in 2021F vs. 2019 level as a
result of cost-cutting, as shown in the 3Q20 run rate, but with adjustment to account for
rental and salary normalization. Nevertheless, we prefer MAPI over LPPF/RALS, as we
believe MAPI’s sales may recover faster. Note, MAPI still booked double-digit revenue
growths in the past three years, is a proxy of the middle-up segment that saw minimal
purchasing power impact during the pandemic, and has a more diverse business vs.
RALS/LPPF, which have seen slow growth in the past years due to struggling department
store business models and competition. Assuming 2021F sales are 90% of the 2019 level,
MAPI is trading attractively at 17x PE2021F (-1 SD).
Key downside risks for the retail sector are COVID-19 vaccine delay, slower-than-expected
purchasing power recovery, and drastic consumer behavior changes toward brick-and-
mortar stores. Key upside risks include a faster-than-expected vaccination timeline, which
would lead to faster-than-expected economic recovery.
We prefer MAPI as our top-pick, as we expect its recovery to be faster, considering its
middle-up target market, diverse business model, sizable cost efficiencies/operating
leverage, and good stock liquidity. Assuming 2021F sales are at 90% of the 2019 level, MAPI
is trading attractively at 17x PE2021F (-1 SD) vs. global peers at 25x PE2021F.
FIGURE 145. RETAILERS SALES SEASONALITY IN 2018-19 FIGURE 146. RETAILERS SALES AT 50-60% OF NORMAL IN 3Q20,
RECOVERING FROM 2Q20
Source: Company, Mandiri Sekuritas *Normal: using sales of respective quarter in 2019 as baseline
Source: Company, Mandiri Sekuritas
FIGURE 147. GLOBAL RETAILERS 1H20 SALES GROWTH FIGURE 148. WHICH INCOME SEGMENT WAS HIT THE MOST BY COVID-
19?
Source: Company, Bloomberg, Mandiri Sekuritas Source: BPS, Mandiri Sekuritas

FIGURE 149. SENSITIVITY ANALYSIS SUMMARY ON EARNINGS GROWTH 2021F (VS. 2019)
Source: Company, Mandiri Sekuritas
Telecom

Analyst: Kresna Hutabarat
Upcoming telecom regulation revision paves the way for a more efficient and
advanced telecom industry. The new Job Creation Bill, released in Nov-20, has set the
path for a more efficient and advanced telecom industry by providing the regulatory
framework for spectrum & infrastructure sharing among telecom operators, 700 MHz
spectrum unlocking, telecom tariff management, and telecom licensing. A new
government regulation is currently being drafted to set up the technical terms and
conditions for the various industry aspects governed by the Job Creation Bill. The release of
this new government regulation, likely in early 2021, should tee-off infrastructure sharing.
Infrastructure sharing could help expand the network-reach of smaller telecom operators
and support the industry’s telecom tariff management in curbing over-competitive pricing
in select regions.
Economic recovery should drive better mobile revenue trends in 2021. The mobile
industry’s revenue growth stalled in 2020 due to intensifying competition and weaker
consumer spending power amid the COVID-19 pandemic. However, mobile revenue trends
may improve in 2021, along with gradual economic recovery and the return of the
population’s movements during the year. We expect the mobile industry revenue growth
to return to low-to-mid single-digit % in 2021.

FIGURE 150. YOY MOBILE REVENUE GROWTH 1Q18-3Q20 FIGURE 151. BIG 3 4G BTS COMPS
15.0% 120,000
10.0% 100,000
80,000
5.0%
60,000
0.0%
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 40,000
-5.0%
20,000
-10.0%
-
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
-15.0% Telkomsel Indosat XL Axiata
Source: Company Data, Mandiri Sekuritas Research estimates Source: Company Data, Mandiri Sekuritas Research estimates
4G LTE capex continues; sustained demand for tower rental. Despite the revenue
slowdown in 2020, we expect mobile network operators to continue their 4G LTE network
expansion in 2021. Stronger and wider 4G LTE network will be key to revenue growth
recovery among the mobile network operators. The continued 4G LTE investments mean
sustained demand for tower rental for the independent tower companies, especially SMN
and Tower Bersama. However, we expect the tower companies’ revenue growth to taper to
mid-to-high single-digit % in 2021, as we expect less inorganic growth support in the year.
Profitability-wise, the towercos are in a good position to defend their EBITDA margins as
they benefit from higher tenancy ratios that help compensate for the impact of discounts
on tower contract renewal rates in 2021. Furthermore, the towercos’ net profit and asset
valuation should also benefit from the low interest-rate cycle in 2021.
FIGURE 152. BIG 3 MOBILE CAPEX 2017-2022F FIGURE 153. EBITDA GROWTH FOR TOWERCOS
40,000 25.0%
35,000
20.0%
30,000
25,000 15.0%
20,000
15,000 10.0%
10,000
5.0%
5,000
- 0.0%
2017 2018 2019 2020F 2021F 2022F 2015 2016 2017 2018 2019 9M20
Telkomsel Indosat XL Axiata SMN Tower Bersama
Source: Company Data, Mandiri Sekuritas Research estimates Source: Company Data, Mandiri Sekuritas Research estimates
Opportunity for sector valuation rerating from asset restructuring and tech
convergence. The telecom industry has several valuation-unlocking opportunities as
telecom companies seek to restructure their businesses in 2021. Telkom Indonesia, for
instance, will be transferring more telecom towers from its mobile subsidiary, Telkomsel, to
its tower subsidiary, Mitratel, as part of a corporate valuation-unlocking exercise.
Telkomsel’s recent investments into leading tech platform, Gojek, could imply more
financial and operational integration between Telkom and the growing Indonesian tech
industry in the future. Meanwhile, Indosat could unlock its value by divesting non-core
assets, such as electronic payment platform and tower assets, and investing more into its
4G LTE network. Lastly, XL Axiata has a comfortable balance sheet that could strengthen
further its national broadband network, including home LTE and FTTH networks.

FIGURE 154. FORWARD EV/EBITDA TLKM VS ISAT VS EXCL FIGURE 155. FORWARD EV/EBITDA TOWR VS TBIG
9.0 18.0
8.0
16.0
7.0
14.0
6.0
5.0 12.0
4.0 10.0
3.0
8.0
2.0
Nov-11
Nov-14
Nov-17
Jun-12
Jun-15
Jul-18
Mar-11
Aug-13
Dec-20
Apr-14
Apr-17
Apr-20
Jan-13
Feb-16
Feb-19
Sep-16
Sep-19
6.0
Nov-11
Nov-14
Nov-17
Jun-12
Jun-15
Jul-18
Mar-11
Aug-13
Dec-20
Apr-14
Apr-17
Apr-20
Jan-13
Feb-16
Feb-19
Sep-16
Sep-19
Telkom Indonesia NTM EV/EBITDA (x) Indosat NTM EV/EBITDA (x)
XL Axiata NTM EV/EBITDA (x) Tower Bersama NTM EV/EBITDA (x) SMN NTM EV/EBITDA (x)
Source: Bloomberg, Mandiri Sekuritas Research Source: Bloomberg, Mandiri Sekuritas Research
Toll Road

Analyst(s): Edbert Surya/Adrian Joezer
Traffic may exceed pre-pandemic level. JSMR’s traffic in Oct-20 and its first-half-of-Nov-
20 revenues run rate reached 87% and 96% to pre-pandemic levels, respectively, beating
MANSEK estimates at 75% and 80%, despite the ongoing transitional large-scale social
distancing (PSBB) in Greater Jakarta. We are confident JSMR’s traffic will fully return to the
pre-COVID level in Dec-20, considering the long-holiday at year-end. We expect the 2021
traffic to exceed the pre-pandemic level, following the global trend that indicates highway
traffic has fully returned to normal at the expense of deserted public mass transportation.
We highlight the slow traffic recovery in Indonesia’s mass public transportation, ranging
from MRT, LRT, and the Greater Jakarta city train, which were still down by 60-85% to pre-
COVID levels. The slow recovery in mass public transportation indicates that people are
avoiding crowds, whereas strong traffic recovery in toll roads signals a potential
incremental toll road traffic in 2021, along with the government’s gradual economy
reopening, thus providing upside for JSMR’s future earnings.
Favorable macro environment. Indonesia’s central bank has cut its rate by 125 bps YTD,
which lowered JSMR’s cost of funds from 9.1% in Dec-19 to 7.9% in Sep-20, as its borrowing
rate is based on time deposits (TD) of 3M + 4% margin. Our sensitivity shows that every 100
bps decline in WACD would reduce JSMR’s interest savings by Rp600bn, providing an
upside for its earnings. We think the street has not priced in the lowered WACD,
considering the Rp1.5tn consensus earnings forecast in FY21 (MANSEK: Rp2.0tn).
Meanwhile, the 70 bps decline in the 10Y-government bond yield amplified JSMR’s WACC
on the back of a lower risk-free rate.
Key risk: another round of strict social distancing implementation. We are fully aware
that JSMR’s traffic will largely depend on COVID-19 handling. However, as the government
eyes to balance between COVID-19 new cases and economic recovery, we think another
strict social distancing is improbable to be reimposed.
JSMR is our top pick in infrastructure space. The firm support of the Ministry of SOE
(MSOE), which ensures JSMR to operate commercially, and the creation of the Nusantara
Investment Authority are the key indicators that JSMR’s CAPEX cycle is already behind. Our
target price of Rp7,040 is based on a DCF-valuation, translating to 12.7x EV/EBITDA 2020,
+1.5x stdev of the 7Y historical mean. We think the valuation rerating is justified, given the
higher EPS on the incremental increase in traffic and the favorable monetary and macro
conditions, which led to a lower WACC.

FIGURE 156. JSMR REVENUE RECOVERY RUN-RATE FIGURE 157. TOLL ROAD RECOVERY VERSUS MASS PUBLIC
TRANSPORTATIONS AS OF LATEST DATA
2H of Nov Nov Busway KRL
March Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 week 1 week 2 MRT LRT Jakarta Transjakarta Commuterline JSMR's toll road
0% 0%
-10% -4%
-5% -4%
-10% -8% -20%
-14% -13% -13%
-20% -30%
-40%
-30%
-29% -50%
-32%
-40% -60%
-60%
-70% -63%
-50% -70%
-51% -80%
-60% -56% -90% -85%
Source: Various sources, company, *MRT’s and LRT’s traffic based on

Source: Company, the first week of Mar-20 is the benchmark of normal latest data in late Sep-20, Busway Transjakarta as of Aug-20, KRL
condition (pre-COVID level) Commuterline and JSMR as of Nov-20
FIGURE 158. RISK-FREE AND INFLATION SENSITIVITY FIGURE 159. GIDN10YR AND JSMR EV/EBITDA
(%) (x) (%)
10.0 15.0 10.0
9.0 14.0
9.0
8.0 13.0
7.0 12.0 8.0
6.0 11.0
5.0 6.17% 7.0
10.0
4.0
3.0 9.0 6.0
3.75%
2.0 8.0
5.0
1.0 7.0
0.0 6.0 4.0
4/7/2019
8/5/2019
4/1/2020
4/22/2016
8/20/2016
4/17/2017
8/15/2017
4/12/2018
8/10/2018
12/8/2018
12/3/2019
7/30/2020
12/18/2016
12/13/2017
11/27/2020
Jan-13
Sep-13
Aug-17
Aug-19
Mar-20
Apr-14
Dec-14
Aug-15
Apr-16
Dec-16
Apr-18
Dec-18
Nov-20
12M Fwd EV/EBITDA (LHS) Govt Bond 10y (RHS)
GIDN10YR Index BI Rate
FIGURE 160. JSMR FOREIGN OWNERSHIP FIGURE 161. JCI INDEX – FOREIGN FLOW
80.0% 73.7%
USDmn
Foreign Flow
70.0% 64.1%
56.9% 5,000
60.0% 3,772
4,000 3,466
2,953
50.0% 3,000 2,390
40.0% 1,713
2,000 1,383 1,253
43.1%
30.0% 35.9% 1,000
20.0% -
26.3%
(1,000)
10.0%
(2,000) (1,572)
0.0% (1,804)
(3,000)
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Jan-13
Oct-13
Jan-14
Oct-14
Jan-15
Oct-15
Jan-16
Oct-16
Jan-17
Oct-17
Jan-18
Oct-18
Jan-19
Oct-19
Jan-20
Oct-20
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
(2,966) (2,707)
(4,000)
(3,661)
(5,000)
LOCAL FOREIGN 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: KSEI Source: Bloomberg

FIGURE 162. MANDIRI SEKURITAS UNIVERSE

Price Price Mkt Cap Net Profit PER (x) P/BV (x) EV/EBITDA (x) EPS Gr (%) Div.Yld (%)
Code Rating
(Rp) Target (Rp Bn) 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021
MANSEK universe 6,013 5,540 4,313,694 180,058 252,612 24.0 17.1 2.4 2.2 15.7 13.2 -27.8 40.3 2.7 2.2
Banking 1,735,173 64,115 101,348 27.1 17.1 2.5 2.3 N.A. N.A. -33.4 58.1 2.3 1.4
BBCA Neutral 34,100 35,000 840,736 26,722 32,541 31.5 25.8 4.6 4.2 N.A. N.A. -6.5 21.8 1.6 1.5
BBNI Buy 6,575 7,500 122,615 4,249 13,755 28.9 8.9 1.1 1.0 N.A. N.A. -72.4 223.7 3.1 0.9
BBRI Neutral 4,280 4,000 527,718 19,246 33,603 27.4 15.7 2.7 2.4 N.A. N.A. -44.0 74.6 3.3 1.1
BBTN Buy 1,840 1,900 19,486 1,510 2,120 12.9 9.2 1.1 1.0 N.A. N.A. 621.6 40.4 2.9 1.5
BDMN Buy 3,400 4,000 32,588 2,703 4,752 12.1 6.9 0.7 0.7 N.A. N.A. -33.6 75.8 4.4 2.9
BJBR Buy 1,555 860 15,299 1,260 1,438 12.1 10.6 1.4 1.3 N.A. N.A. -19.2 14.1 6.0 6.1
BJTM Buy 670 590 10,052 1,146 1,434 8.8 7.0 1.0 1.0 N.A. N.A. -16.8 25.2 7.2 7.2
BNGA Buy 1,025 840 25,760 2,340 4,211 11.0 6.1 0.6 0.6 N.A. N.A. -35.8 80.0 5.7 3.6
BNLI Sell 2,650 430 74,313 909 1,494 81.8 49.7 3.1 2.9 N.A. N.A. -39.4 64.4 0.0 0.0
PNBN Buy 1,105 1,100 26,617 1,976 3,508 13.5 7.6 0.7 0.6 N.A. N.A. -40.4 77.5 0.0 0.0
BTPS Buy 3,980 3,200 30,661 1,189 1,547 25.8 19.8 4.9 4.0 N.A. N.A. -15.1 30.1 0.9 0.8
BFIN Buy 414 475 6,195 781 841 7.9 7.4 0.9 0.8 N.A. N.A. 9.7 7.7 2.9 3.8
AMOR Buy 2,970 2,500 3,135 80 88 39.4 37.3 11.0 11.4 29.7 31.3 -12.9 5.6 2.8 2.5
Construction & materials 214,357 3,664 8,077 58.5 26.5 1.6 1.6 16.5 12.2 -70.9 120.5 1.4 0.8
INTP Buy 14,525 14,500 53,470 1,673 2,003 32.0 26.7 2.2 2.1 14.9 13.0 -8.9 19.8 1.2 1.1
SMGR Buy 12,000 11,020 71,178 2,520 2,825 28.2 25.2 2.1 2.0 10.9 10.3 5.4 12.1 1.7 1.3
ADHI Buy 1,295 810 4,611 105 361 43.9 12.8 0.8 0.8 10.4 8.0 -84.2 243.0 2.9 0.5
PTPP Buy 1,610 1,370 9,982 219 754 45.6 13.2 0.8 0.8 12.2 8.0 -76.5 244.3 2.8 0.7
WIKA Buy 1,820 1,680 16,308 561 1,159 29.1 14.1 1.1 1.0 10.3 7.8 -75.4 106.5 0.7 1.4
WSKT Buy 1,200 1,230 16,057 -2,141 -1,501 -7.5 -10.7 1.6 1.8 38.1 23.5 N/M 29.9 -2.7 -1.9
WTON Buy 388 500 3,382 285 438 11.9 7.7 0.9 0.9 5.1 3.7 -44.4 53.7 4.5 2.5
WSBP Buy 238 195 6,274 -115 83 -54.4 75.7 0.9 0.9 22.3 15.8 N/M N/M 6.4 0.0
JSMR Buy 4,560 7,040 33,096 557 1,957 59.4 16.9 1.8 1.6 22.1 12.1 -74.7 251.0 1.3 0.3
Consumer staples 837,746 38,546 48,734 21.7 17.2 4.8 4.3 13.9 11.3 -16.1 26.4 4.0 3.4
ICBP Buy 9,825 12,050 114,578 5,977 6,319 19.2 18.1 4.0 3.6 11.3 10.9 18.6 5.7 2.2 2.6
INDF Buy 7,025 9,950 61,679 5,919 6,307 10.4 9.8 1.5 1.4 6.5 6.1 20.6 6.5 4.0 4.8
MYOR Buy 2,680 2,600 59,922 2,413 2,190 24.8 27.4 5.3 4.8 16.8 15.6 21.4 -9.2 1.3 1.5
UNVR Buy 7,500 9,700 286,125 7,420 8,138 38.6 35.2 57.2 53.1 27.1 24.8 0.3 9.7 2.6 2.6
GGRM Buy 42,950 63,450 82,640 7,422 10,321 11.1 8.0 1.6 1.4 7.3 5.8 -31.8 39.1 6.1 6.1
HMSP Buy 1,625 2,400 189,017 8,342 13,384 22.7 14.1 6.2 5.3 17.5 10.4 -39.2 60.4 7.2 4.3
SIDO Buy 780 980 23,400 912 1,011 25.7 23.1 7.2 7.0 19.2 17.2 12.9 10.9 3.2 3.8
MLBI Buy 9,675 13,250 20,385 141 1,063 145.1 19.2 53.4 15.6 35.4 12.3 -88.3 656.9 4.4 0.7
Healthcare 60,839 842 1,080 72.3 56.3 4.7 4.4 25.4 20.5 30.2 28.3 0.1 0.1
MIKA Buy 2,770 2,750 40,306 547 659 73.7 61.2 8.9 8.1 48.7 39.2 -25.1 20.5 0.0 0.0
SILO Buy 5,775 5,950 9,384 -44 22 -213.4 422.5 1.6 1.6 12.9 10.1 87.0 N/M 0.0 0.0
HEAL Buy 3,750 4,000 11,149 339 400 32.9 27.9 4.6 4.0 14.0 11.6 32.9 17.8 0.3 0.4
Consumer discretionary 342,855 21,000 25,795 16.3 13.3 1.7 1.6 11.3 9.0 -29.8 22.8 3.6 2.9
ACES Neutral 1,810 1,500 31,042 711 1,055 43.7 29.4 6.3 5.5 33.9 24.0 -31.0 48.5 1.7 1.1
LPPF Buy 1,415 1,800 4,129 50 497 81.8 8.3 2.3 1.8 7.0 2.8 -96.3 884.6 0.0 0.4
MAPA Buy 2,840 3,850 8,095 54 606 148.7 13.4 2.6 2.2 21.1 7.2 -92.1 1013.2 0.0 0.2
MAPI Buy 895 1,000 14,857 -1,704 543 -8.7 27.3 3.5 3.1 -138.3 8.7 N/M N/M 1.4 0.0
RALS Buy 775 700 5,499 -132 143 -41.7 38.5 1.5 1.5 -75.9 16.7 N/M N/M 7.0 -1.6
ERAA Buy 1,940 2,000 6,189 268 436 23.1 14.2 1.2 1.1 11.3 9.5 -9.3 63.0 0.9 1.4
ASII Buy 5,675 6,300 229,744 17,763 18,098 12.9 12.7 1.5 1.4 10.8 9.2 -18.2 1.9 4.3 3.5
SCMA Buy 1,875 1,800 27,614 1,566 1,693 17.6 16.3 4.7 4.3 12.3 11.8 35.7 8.1 4.0 4.3
MNCN Buy 1,060 2,200 13,148 2,427 2,593 5.4 5.1 1.0 0.8 3.9 3.4 24.1 6.8 2.8 3.0
PZZA Buy 840 750 2,538 -2 130 -1,230 19.5 2.1 1.9 13.8 7.4 N/M N/M 3.9 0.0

Price Price Mkt Cap Net Profit PER (x) P/BV (x) EV/EBITDA (x) EPS Gr (%) Div.Yld (%)
Code Rating
(Rp) Target (Rp Bn) 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021
Commodities 363,684 17,004 23,292 21.4 15.6 1.6 1.5 7.2 6.0 -30.0 37.0 1.8 2.3
UNTR Buy 27,400 31,700 102,206 7,172 10,603 14.2 9.6 1.6 1.4 5.7 4.3 -36.6 47.8 2.1 3.1
ADRO* Buy 1,570 1,750 50,218 207 256 17.0 13.8 0.9 0.9 5.0 4.7 -48.9 24.0 2.6 2.5
HRUM* Neutral 2,940 3,000 7,546 29 10 18.4 54.8 1.6 1.6 10.0 14.0 54.7 -66.1 3.0 1.0
INDY* Neutral 1,965 910 10,238 2 6 434.3 113.2 0.8 0.8 2.5 2.1 N/M 286.9 0.1 0.2
ITMG* Neutral 15,400 15,000 16,887 58 93 20.5 12.8 1.4 1.4 7.0 5.3 -54.5 61.3 4.1 6.6
PTBA Buy 3,050 3,100 35,144 2,246 2,917 15.6 12.0 2.0 1.9 10.6 7.9 -47.3 29.9 4.8 6.2
ANTM Buy 1,525 1,300 36,647 1,107 1,320 33.1 27.8 1.6 1.6 13.3 12.6 470.9 19.3 1.1 1.3
INCO* Neutral 5,275 4,000 52,414 103 106 35.8 34.8 1.8 1.7 11.5 11.1 78.6 3.7 0.0 0.0
TINS Neutral 1,315 800 9,794 -111 357 -88.1 27.5 1.8 1.7 21.6 11.9 81.8 N/M -0.4 1.3
MDKA* Buy 1,945 2,100 42,591 64 99 46.5 30.2 5.3 4.6 14.7 11.3 -11.8 55.2 0.0 0.0
Property & Industrial Estate 120,513 5,740 8,875 21.0 13.6 0.9 0.9 12.2 10.6 -29.2 54.6 2.0 1.4
ASRI Buy 252 210 4,952 42 683 118.5 7.3 0.5 0.4 11.6 8.5 -95.9 1534.2 0.8 0.8
BSDE Buy 1,085 1,160 22,971 1,399 2,050 16.4 11.2 0.7 0.7 12.1 11.3 -54.4 46.5 0.0 0.4
CTRA Buy 915 1,120 16,983 832 1,094 20.4 15.5 1.1 1.0 12.2 10.5 -28.2 31.5 0.8 0.8
JRPT Buy 580 670 7,975 997 1,065 8.0 7.5 1.0 0.9 7.1 6.4 -1.9 6.7 3.3 0.1
PWON Buy 535 770 25,765 985 1,879 26.1 13.7 1.6 1.5 14.9 9.9 -63.8 90.7 1.1 1.1
SMRA Buy 795 960 11,469 420 604 27.3 19.0 1.5 1.4 11.6 10.4 -18.5 43.8 0.6 0.6
LPKR Neutral 230 200 16,236 74 391 219.8 41.5 0.6 0.6 12.9 13.0 N/M 429.7 0.4 0.4
DMAS Buy 254 300 12,242 885 988 13.8 12.4 2.1 2.1 13.3 12.0 -33.7 11.7 12.6 8.3
BEST Neutral 199 130 1,920 107 122 18.0 15.8 0.4 0.4 7.9 11.2 -72.0 14.2 1.8 0.5
Telecom 465,247 24,823 26,452 18.7 17.6 3.0 2.8 6.3 5.9 -0.7 6.6 3.9 4.1
EXCL Buy 2,620 3,600 27,902 2,186 1,340 12.8 20.8 1.3 1.3 4.8 4.4 207.9 -38.7 0.8 0.7
TLKM Buy 3,320 3,900 328,887 19,403 21,026 17.0 15.6 3.2 3.1 5.9 5.7 4.0 8.4 4.7 5.1
ISAT Buy 3,330 3,200 18,095 -1,046 -648 -17.3 -27.9 1.5 1.6 4.9 4.3 N/M 38.1 0.0 0.0
LINK Buy 2,730 3,300 7,746 736 744 10.5 10.4 1.6 1.5 4.5 4.4 -17.8 1.1 5.7 4.8
TBIG Buy 1,510 1,400 32,663 1,068 1,264 30.6 25.8 6.0 5.3 13.0 12.1 30.4 18.3 1.8 1.8
TOWR Buy 995 1,300 49,954 2,476 2,725 20.2 18.3 5.0 4.3 11.2 10.5 5.7 10.1 2.4 2.4
Transportation 3,603 -175 251 -20.6 14.4 0.7 0.7 14.9 5.7 -155.7 N/M -1.2 1.7
BIRD Buy 1,440 1,700 3,603 -175 251 -20.6 14.4 0.7 0.7 14.9 5.7 N/M N/M -1.2 1.7
Poultry 128,102 2,988 5,574 42.9 23.0 3.6 3.2 19.0 12.9 -46.2 86.5 1.2 1.0
CPIN Buy 6,600 6,950 108,227 2,775 3,728 39.0 29.0 4.8 4.3 22.3 18.2 -23.6 34.3 1.2 1.1
JPFA Buy 1,545 1,700 18,118 344 1,696 52.6 10.7 1.6 1.4 12.3 6.4 -80.5 392.5 1.3 0.6
MAIN Buy 785 700 1,757 -131 150 -13.4 11.7 0.9 0.8 14.5 5.3 N/M N/M 0.0 0.0
Oil and Gas 41,574 1,511 3,133 27.5 13.3 1.1 1.1 8.2 6.6 61.2 107.4 1.5 3.0
PGAS* Buy 1,715 1,700 41,574 106 221 27.5 13.3 1.1 1.1 8.2 6.6 56.4 109.1 1.5 3.0
Note:
- *) net profit in USD mn
- U/R means Under Review
- n/a means Not Available
- N/M means Not Meaningful
- N.A means Not Applicable

Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk
Menara Mandiri Tower I, 25th floor, Jl. Jend. Sudirman Kav. 54 – 55, Jakarta 12190, Indonesia
General: +62 21 526 3445, Fax : +62 21 527 5374 (Equity Sales)
RESEARCH
Adrian Joezer Head of Equity Research, Strategy, Consumer adrian.joezer@mandirisek.co.id +6221 5296 9415
Tjandra Lienandjaja Deputy Head of Equity Research, Banking tjandra.lienandjaja@mandirisek.co.id +6221 5296 9617
Ariyanto Kurniawan Automotive, Coal, Metal Mining, Chemical ariyanto.kurniawan@mandirisek.co.id +6221 5296 9682
Kresna Hutabarat Telecom, Media kresna.hutabarat@mandirisek.co.id +6221 5296 9542
Lakshmi Rowter Healthcare, Consumer, Retail lakshmi.rowter@mandirisek.co.id +6221 5296 9549
Robin Sutanto Property, Building Material robin.sutanto@mandirisek.co.id +6221 5296 9572
Edbert Surya Construction, Transportation edbert.surya@mandirisek.co.id +6221 5296 9623
Silvony Gathrie Banking silvony.gathrie@mandirisek.co.id +6221 5296 9544
Inggrid Gondoprastowo Healthcare, Consumer, Retail inggridgondoprastowo@mandirisek.co.id +6221 5296 9450
Riyanto Hartanto Poultry, Research Assistant riyanto@mandirisek.co.id +6221 5296 9488
Henry Tedja Research Assistant henry.tedja@mandirisek.co.id +6221 5296 9434
Wesley Louis Alianto Research Assistant wesley.alianto@mandirisek.co.id +6221 5296 9510
Leo Putera Rinaldy Chief Economist leo.rinaldy@mandirisek.co.id +6221 5296 9406
Imanuel Reinaldo Economist imanuel.reinaldo@mandirisek.co.id +6221 5296 9651
INSTITUTIONAL SALES
Silva Halim Managing Director silva.halim@mandirisek.co.id +6221 527 5375
Lokman Lie Head of Equity Capital Market lokman.lie@mandirisek.co.id +6221 527 5375
Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id +6221 527 5375
Feliciana Ramonda Institutional Sales feliciana.ramonda@mandirisek.co.id +6221 527 5375
Henry Pranoto Institutional Sales henry.pranoto@mandirisek.co.id +6221 527 5375
Kevin Giarto Institutional Sales kevin.giarto@mandirisek.co.id +6221 527 5375
Sharon Anastasia Tjahjadi Institutional Sales sharon.tjahjadi@mandirisek.co.id +6221 527 5375
Talitha Medha Anindya Institutional Sales talitha.anindya@mandirisek.co.id +6221 527 5375
Angga Aditya Assaf Institutional Sales angga.assaf@mandirisek.co.id +6221 527 5375
Ilona Carissa Institutional Sales Ilona.simanungkalit@mandirisek.co.id +6221 527 5375
Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id +6221 527 5375
Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id +6221 527 5375
Jane Theodoven Sukardi Equity Dealing jane.sukardi@mandirisek.co.id +6221 527 5375
Michael Taarea Equity Dealing michael.taarea@mandirisek.co.id +6221 527 5375
RETAIL SALES
Andreas M. Gunawidjaja Head Retail Equities andreas@mandirisek.co.id 6221 5296 9693
Boy Triyono Jakarta boy.triyono@mandirisek.co.id 6221 5296 5678
Care Center Online Jakarta care_center@mandirisek.co.id 14032
Ruwie Medan ruwie@mandirisek.co.id 6261 8050 1825
Linawati Surabaya linawati@mandirisek.co.id 6231 535 7218
Maulidia Osviana Lampung maulidia.osviana@mandirisek.co.id 62721 476 135
Aidil Idham Palembang aidil.idham@mandirisek.co.id 62711 319 900
Yudhistira Putra Pradana Bandung yudhistira.pradana@mandirisek.co.id 6222 426 5088
Yuri Ariadi Pontianak yuri.ariadi@mandirisek.co.id 62561 582 293
Yogiswara Perdana Yogyakarta yogiswara.perdana@mandirisek.co.id 62274 560 596
Achmad Rasyid Bali achmad.rasyid@mandirisek.co.id 62361 475 3066
www.most.co.id care_center@mandirisek.co.id 14032
INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last
published report, are: Buy (15% or higher), Neutral (-15% to15%) and Sell (-15% or lower).
DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and
supervised by the Financial Services Authority (OJK). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its
judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its
accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein
to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will
seek investment banking or other business relationships with the companies in this report. For further information please contact our number
62-21-5263445.
ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the
companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be
influenced by any part or all of his or her compensation.

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FOCUS | XXX

FOCUS | Equity Strategy

Sector Update | 14 December 2020

Mandiri Sekuritas Analyst

Please see important disclosure at the back of this report Page 1 of 69

FIGURE 1. OUR MOST PREFERRED STOCKS (IN ALPHABETICAL ORDER)

Please see important disclosure at the back of this report Page 2 of 69

2021 Investment Thesis

End-2021 JCI Index 6,850 7,300 5,270

2021 Investment Thesis Across Asset Classes

2021 Equity Investment Themes

2021 Most and Least Preferred Trades

Source: Mandiri Sekuritas Research

Please see important disclosure at the back of this report Page 3 of 69

2021 Sectoral View

We believe recovery in both 4W and 2W

Please see important disclosure at the back of this report Page 4 of 69

Key Sectors Base View Upside Risks Downside Risks

FMCG allocation will likely be reduced,

Please see important disclosure at the back of this report Page 5 of 69

Key Sectors Base View Upside Risks Downside Risks

Please see important disclosure at the back of this report Page 6 of 69

18 12M fwd PE Japan 18%

-15% -10% -5% 0% 5% 10% 15% 20%

FIGURE 6. BREAKDOWN OF SECTOR RETURNS IN 2020 RELATIVE TO 2019

Please see important disclosure at the back of this report Page 7 of 69

Earnings Growth Outlook

FIGURE 7. SUMMARY OF MANSEK UNIVERSE’S NET PROFIT GROWTH

Please see important disclosure at the back of this report Page 8 of 69

FIGURE 9. SECTOR CONTRIBUTORS TO OUR 2020F-22F EARNINGS GROWTH

JCI Trailing EPS, YoY USD/IDR, YoY

Source: Factset Source: Bloomberg, Company, Mandiri Sekuritas

Please see important disclosure at the back of this report Page 9 of 69

2021 Investment Themes

Please see important disclosure at the back of this report Page 10 of 69

Source: Mandiri Sekuritas, COVID-19 mitigation/economic recovery team, Ministry of Health

Please see important disclosure at the back of this report Page 11 of 69

Source: BPS, Ministry of Health, Mandiri Sekuritas Source: BPS

Distribution of Active Cases Minus Distribution of Population Case Fatality Rates

Source: BNPB, CEIC, Mandiri Sekuritas Source: BNPB, Mandiri Sekuritas

Gradual activity normalization, with revenue run-rate normalizing in 4Q21 at the

Please see important disclosure at the back of this report Page 12 of 69

EBIT, YoY Net Profit, YoY

Source: Mandiri Group Source: Company data, Mandiri Sekuritas

FIGURE 21. 7-DMA IN INDONESIA’S MOBILITY TREND ACROSS

Special Region of…

West Nusa Tenggara

Transit Stations Workplaces Residential (35.0)

Source: Google Mobility Trend Source: Google Mobility Trend

Please see important disclosure at the back of this report Page 13 of 69

Source: Ministry of Health Source: BNPB

Please see important disclosure at the back of this report Page 14 of 69

Uneven Normalization with Post-Pandemic Industry Consolidation

Source: Factset Source: OJK

FIGURE 27. INDONESIA’S LATEST COVID-19 VACCINATION TIMELINE

Please see important disclosure at the back of this report Page 15 of 69

FIGURE 28. SECTORAL ROE TREND

Please see important disclosure at the back of this report Page 16 of 69

20.0 -70% 2,000

Source: Gaikindo Source: Company, Mandiri Sekuritas estimates

Source: Gaikindo Source: Company

Please see important disclosure at the back of this report Page 17 of 69