Flash Focus: Erajaya Swasembada (ERAA IJ/Not rated) - Building the Next Leg of Growth

We recently met with ERAA's IR to discuss its 2H26 outlook, focusing on the handset cycle, expansion of non-Digital businesses and capital allocation. Management is targeting mid- to high-SD FY26 SSSG, versus 7M26 SSSG of 2.2% and Jul'26 SSSG of -8.6% YoY, with the softer run-rate partly reflecting a tougher 2H25 base following the delayed iPhone 16 launch in Apr-25.

We expect SSSG to remain soft in 3Q26F as consumers defer purchases ahead of the new iPhone launch, with local availability likely in 4Q26F. The initial launch should skew toward premium models, supporting ERAA's ongoing premiumisation trend. 1H26 handset volume rose 6% YoY while ASP grew 10%. We expect 4Q26F earnings to benefit initially from higher ASPs, with volume contribution becoming more visible into 1Q27F.

Erablue, which replicates DMX's small-format retail playbook in Indonesia's fragmented ICT market, is gaining traction: 7M26 SSSG of 15.9% YoY, revenue growth of 89% YoY, and a store base of 300 as of Sep-26 YTD, targeting 500 stores by FY27F and 1,000 by FY30F.

ERAA's latest buyback up to 797.5mn shares (5% of issued shares), following 236.3mn shares already repurchased, signals management confidence that current valuation undervalues future potential. Full execution could lift treasury shares to c.1.4bn (c.8.8% of issued shares), implying c.5% potential EPS accretion.

ERAA trades at 6.9x P/E, around +1SD above its 5-year average but less than half the 15.5x regional peer median. While the handset-heavy mix warrants a discount, we see room for the gap to narrow as Active Lifestyle and Erablue become more meaningful earnings contributors, with Erablue's path to profitable scale a potential catalyst for further re-rating.