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Danareksa Equity Snapshot - PTBA 12 Maret 2018
March 12, 2018 10:34

Bukit Asam(PTBA IJ)

Strong earnings on higher coal prices

Bukit Asam (PTBA) reported net profits of IDR1,851bn in 4Q17 (+105.2% qoq and +93.9% yoy). The 2017 net profits are up by 123.1% yoy at IDR4,476bn. The strong net profits growth reflects: a) higher coal prices which lifted coal ASP and b) higher coal production. The results beat the consensus and our forecast owing to better-than-expected revenues and gross margins. We maintain our BUY call while reviewing our previous target price of IDR2,900.

4Q17: Higher margins boost the quarterly net profits.  The company reported brisk net profits growth of 105.2% qoq to IDR1,851bn in 4Q17. The strong net profits growth owed to: a) 46.9% qoq revenues growth, b) gross margins improvement which we believe was attributable to a lower stripping ratio and c) a lower corporate tax rate of 20.7% in 4Q17 (3Q17: 26.7%).

2017: higher net profits on strong coal prices and production.  The impact from the higher coal prices and higher coal production (on the back of greater railway capacity) was reflected in strong revenues growth of 37.5% yoy in 2017. Coupled with the company’s ability to lower its stripping ratio (the stripping ratio in 9M17 was 3.8x vs. 5.4x in 2016), the 2017 net profits jumped by 123.1% yoy to IDR4,476bn.

Capping of the domestic coal price at USD70/tonne to impact PTBA’s earnings.  With the domestic coal price to be capped at USD70/tonne - a 30% discount to the current coal price and 21% lower than our latest assumption of USD88/tonne for 2018 – the profitability of the coal mining companies under our coverage will be reduced. Assuming the capping of the coal price at USD70/tonne applies to DMO - which is 25% of total production - the new policy will reduce PTBA’s earnings by around 10.5 – 12.7% in 2018 and 2019.

Maintain BUY while reviewing our previous target price of IDR2,900 (based on DCF valuation with WACC of 11.5% and long-term growth of 3%). More details will be available after the analyst meeting. The stock is currently trading at an undemanding valuation of 9.5x 2018F PE.

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