New capacity and resuming operations

ARNA posted record quarterly revenue and NPAT in 2Q26, at IDR899bn (+23% y-y) and IDR137bn (+39% y-y), respectively, taking 1H26 revenue to IDR1.5tn (+8% y-y) and NPAT to IDR221bn (+8% y-y) – both at 46% of our FY26F estimates, in line adjusting for seasonality. The strong quarter reflects the reversal of 1Q26's supply constraint: rejuvenation works at plants 2C and 5C (estimated 11-15% of capacity) are now complete, while the newly commissioned plant 4D (white body, 5mn sqm) adds ~7% to capacity.

Robust demand continues

The record result was driven by both price and volume. ASP grew 14% y-y, reflecting hikes to offset rising gas costs as well as a richer white body sales mix, while volume posted a record quarter (+7% y-y, +27% q-q), confirming the reversal of 1Q26's supply constraint. By product, rectified red body remains the main growth driver, with sales strongest in Java and Sumatra on the back of an improved B2C distribution channel.

Prudent cost management

Blended cash costs rose just +10% y-y/+9% q-q despite the non-subsidized gas benchmark (12.5% x ICP) surging +56% y-y/+31% q-q, reflecting prudent cost management and subsidized gas allocation, in our view. Further relief is coming amid layoff concerns – the Ministry of Energy and Mineral Resources announced a cut in industrial gas prices from USD20–23/MMBTU to USD13/MMBTU, with our channel checks confirming June declines. Like FMCG players, we expect ARNA to hold prices, setting up margin expansion in coming quarters.

Maintain Buy and TP of IDR820

ARNA remains one of our top picks in the building materials sector, underpinned by: (1) anti-dumping measures curtailing illegal tile imports; (2) scope for a higher payout ratio as capex intensity declines; and (3) a steady growth outlook supporting dividend yield forecast. Our TP implies 12x FY26F P/E, vs the current 7x, and a 9.5% yield. Key downside risks include higher-than-expected gas costs, broad-based demand weakness, and changes in industry regulation.

 

Fig. 1: ARNA 1H26 results

ARNA 1H26 results
in IDRbn	1Q25	2Q25	1Q26	2Q26	QoQ	YoY	1H25	1H26	YoY	% FY26F
Revenue	691	733	632	899	42%	23%	1,423	1,530	7.5%	46%
Gross Profit	220	217	190	288	51%	33%	438	478	9.3%	45%
Operating Profit	138	127	110	187	69%	47%	265	297	12%	47%
Net Income	105	99	83	137	65%	39%	204	221	8.1%	46%
GPM (delta in bps)	31.9%	29.6%	30.1%	32.1%	195	243	30.7%	31.3%	91
OPM	19.9%	17.4%	17.5%	20.8%	332	341	18.6%	19.4%	117
NPM	15.2%	13.5%	13.2%	15.3%	213	177	14.3%	14.4%	52
Operational Result	1Q25	2Q25	1Q26	2Q26	QoQ	YoY	1H25	1H26	YoY	% FY26F
Sales volume (mn sqm)	16.6	17.2	14.5	18.5	27%	7.4%	34	33	-2.6%	43%
ASP (IDR/sqm)	41,569	42,644	43,633	48,687	12%	14%	42,115	46,466	10.3%
Cash cost (IDR/sqm)	31,429	33,411	33,729	36,611	8.5%	9.6%	32,437	35,344	9.0%
Plant utilization	97%	98%	90%	93%			98%	93%

 

Fig. 2: Financials trends – 2Q26 was record print

 

Fig. 3: ARNA’s operational and margin trend – room for higher utilization, in our view

 

 

Fig. 4: ARNA’s plant breakdown – total production capacity sits at 73.8mn sqm per annum

INVESTMENT RATINGS
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Gerald hugo (Gerald.hugo@verdhana.id)

Felix Justin (Felix.wirianto@verdhana.id)