Indonesia Urban Demand And Healthcare Expansion Will Drive Future Success

Key Takeaways

• Strong landbank, diversified project launches, and healthcare growth position the company to capitalize on rising urbanization and evolving consumer demand for long-term revenue expansion.
  
• Successful retail operations, innovation in property offerings, and effective deleveraging enhance financial stability, recurring income, and profitability resilience.
  
• Margin pressures, reliance on mortgage-driven housing sales, hotel risks from government spending cuts, healthcare uncertainty, and asset concentration heighten earnings and cash flow vulnerability.

Catalysts

Provides property development services in Indonesia.

• The company's large, underutilized landbank (with a gross development value of IDR 155 trillion) combined with ongoing and upcoming project launches-including new developments in additional cities and both premium and affordable housing segments-positions it to capture long-term demand driven by urban population growth and rising disposable incomes, likely supporting sustained revenue and cash flow growth.
  
• The positive momentum in mall operations, demonstrated by improving visitor traffic (up 10% yoy), higher occupancy rates (+5% yoy), and strong tenant demand, signals that Lippo Karawaci's retail exposure is benefiting from Indonesia's expanding middle class and increasing demand for modern amenities, which should help underpin recurring rental income and stable EBITDA margins.
  
• Ongoing progress in refinancing and deleveraging (e.g., conversion to all-IDR debt, extended maturities to 2032, and a 73% reduction in net interest expenses yoy) is relieving financial pressure, reducing refinancing risks, and freeing up future earnings by lowering finance costs, thereby supporting higher net margins and resilience.
  
• Continued expansion and strategy advancement at Siloam Hospitals, coupled with steady increases in healthcare demand, puts Lippo Karawaci in a favorable position to grow its recurring healthcare segment revenues and strengthen EBITDA, particularly as average revenue per bed and per patient day rise above market benchmarks.
  
• Innovation in property product offerings-such as the launch of new premium and affordable housing products that have achieved better-than-expected sales-allows the company to tap into evolving consumer demand preferences, potentially accelerating sales, reducing inventory overhang, and improving future revenue and gross margins.

Lippo Karawaci Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Lippo Karawaci's revenue will grow by 4.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -13.5% today to 12.9% in 3 years time.
• Analysts expect earnings to reach IDR 1082.6 billion (and earnings per share of IDR 9.0) by about September 2028, up from IDR -1005.2 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.9x on those 2028 earnings, up from -7.2x today. This future PE is greater than the current PE for the ID Real Estate industry at 18.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 20.77%, as per the Simply Wall St company report.

Lippo Karawaci Future Earnings Per Share Growth

Risks

• Persistent margin compression in the real estate development business, especially due to low-margin apartment handovers caused by development delays, threatens ongoing profitability and could impact net margins and earnings.
  
• Heavy reliance on affordable housing sales dominated by mortgage financing (63% of sales) exposes the company to shifts in consumer lending policies or higher interest rate environments, posing risks to revenue growth and sales velocity.
  
• Hotel segment faces external risks from reductions in government spending, which has already depressed occupancy and EBITDA; sustained or repeated cuts could further pressure lifestyle division revenues and reduce overall earnings resilience.
  
• Declining inpatient admissions and occupancy rates in the healthcare segment, offset slightly by increased revenue per bed, highlight a potential risk if patient conversion and utilization trends do not stabilize, potentially hindering healthcare segment growth and consolidated revenue.
  
• High dependence on a few core developments (Lippo Village, Lippo Cikarang) raises asset concentration and execution risk; any underperformance or market saturation in these flagship projects could lead to cash flow volatility and restrict recurring revenue streams.

Valuation

• The analysts have a consensus price target of IDR190.0 for Lippo Karawaci based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be IDR8365.8 billion, earnings will come to IDR1082.6 billion, and it would be trading on a PE ratio of 21.9x, assuming you use a discount rate of 20.8%.
• Given the current share price of IDR102.0, the analyst price target of IDR190.0 is 46.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.