Solid 2Q26 : Net profit grew 36.7% yoy

2Q26 results: Growth remained strong,… In 2Q26, revenue increased by 19.3% yoy and 6.4% qoq, with stellar performance from both of the company’s business segments; the trading segment grew 17.0% yoy/6.0% qoq to IDR 2.7tn, while the manufacturing segment expanded by 21.6% yoy/6.7% qoq. In addition, AUTO’s affiliates and joint ventures contributed IDR 328bn in income, trending in the same direction but at an accelerated pace (54.2% yoy/12.7% qoq). Cumulatively for 1H26, AUTO booked IDR 10.85tn in revenue (+13.2% yoy) and IDR 1.1tn in net profit (+22.6% yoy), accounting for 52% and 50% of our FY26 forecasts, respectively. To note, AUTO’s first-half performance is typically softer than its second half. Over the past five years, first-half revenue has contributed only 46–50% of the full-year total, with net profit accounting for just 43–50%. Assuming this trend repeats itself, we can conclude that AUTO’s 2Q26 results slightly exceeded our projections.

…though maintaining margins proved challenging. AUTO's 2Q26 gross margin compressed by 60 bps yoy/90 bps qoq, driven by higher material costs in the manufacturing segment and a lag in passing those price hikes to customers. In contrast, the trading segment's margin remained stable at 24.7%. While manufacturing margin pressures led to a -90% yoy drop in minority interest contributions, AUTO still delivered a solid 10.6% net profit margin, supported by strong affiliate earnings.

2H26F outlook: Positive HoH growth with expanding margins. AUTO is well-positioned for a positive HoH performance in 2H26, underpinned by margin expansion. Input costs have peaked and are steadily normalizing, while price adjustments slated for 3Q26 will enable the company to fully pass through accumulated cost inflation. As a result, gross margins are projected to widen in 2H26. Provided the broader automotive market continues to recover and geopolitical conditions remain stable, management expresses high confidence in replicating its historical pattern of stronger second-half results.

Maintain BUY with TP of IDR 3,150

Maintain BUY. We reiterate our BUY recommendation on AUTO with same target price of IDR 3,150/sh, implying 2026F P/E of 6.6x, or +0.5SD above its 5-year average. At present, AUTO is trading at 5.6x 2026F P/E, offering compelling upside potential.

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