AALI
Contact our analyst Revita
22% upside, Buy
11th May 2021
Current price Rp 10450
Target price Rp12800
11th May 2021
Current price Rp 10450
Target price Rp12800
Flat production
As of 2020FY, FFB and CPO production decreased -7.7% YoY and -13.6% YoY respectively driven by drought in 2019FY. As of 1Q21, CPO production had decreased by a lesser 0.8% YoY accompanied by a 3.3% decrease in FFB. In addition to the weather factor in the low production in there is also the impact of the Covid 19 pandemic that has limited mobility and production particularly in Plasma plantations. AALI targets production growth of 5% YoY as the majority of plants are mature and yield has already increased over the last 10 years. Nucleus production growth depends on the Weather. AALI’s planted area age was 15.5 years in 2020 compared to 15 years in 2019. AALI nucleus area has decreased while the plasma areas have increased. AALI targets annual replanting of 5,000 ha this year. AALI targets an increase in production supported by third party and Plasma Plantations in addition to nucleus plantation yield optimization to increase the company's performance this year. AALI’s digitalization program has helped to overcome work and production constraints during the pandemic. We are targeting FFB and CPO production in 2021 of 4,86 mn tons and 1,51 mn tons respectively.
As of 2020FY, FFB and CPO production decreased -7.7% YoY and -13.6% YoY respectively driven by drought in 2019FY. As of 1Q21, CPO production had decreased by a lesser 0.8% YoY accompanied by a 3.3% decrease in FFB. In addition to the weather factor in the low production in there is also the impact of the Covid 19 pandemic that has limited mobility and production particularly in Plasma plantations. AALI targets production growth of 5% YoY as the majority of plants are mature and yield has already increased over the last 10 years. Nucleus production growth depends on the Weather. AALI’s planted area age was 15.5 years in 2020 compared to 15 years in 2019. AALI nucleus area has decreased while the plasma areas have increased. AALI targets annual replanting of 5,000 ha this year. AALI targets an increase in production supported by third party and Plasma Plantations in addition to nucleus plantation yield optimization to increase the company's performance this year. AALI’s digitalization program has helped to overcome work and production constraints during the pandemic. We are targeting FFB and CPO production in 2021 of 4,86 mn tons and 1,51 mn tons respectively.
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Higher CPO prices cover up lower volume
As of 1Q21, AALI recorded a 6.8% YoY decrease in sales volume of CPO and derivatives. However, revenue increased by 5.0% YoY to IDR 5 trillion as a result of an 8.0% YoY increase in average CPO selling prices. Net profit decreased by 56.2% in March 2021 to Rp 162 billion compared to the same period last year due to a significant increase in other expenses, up 763% yoy, coming from losses related to forward selling contracts. In 2021, the increase in CPO prices will support an increase in revenues amid weakening production and sales volumes. But the CPO price increase is blocked by changes in the formulation of the export levy in late 2020 to support the biodiesel program, from a flat tax to progressive. This will reduce the potential price increases for CPO companies including AALI. We are targeting Average Selling Price (ASP) this year to rise 9% YoY to 9300 IDR/kg compared to 8545 IDR/Kg in 2019, covering a decrease in sales volume target of -3% YoY in 2021. Total revenue of CPO 2021 is forecast to increase 5% YoY in 2021.
Valuation: 22% upside
We estimate a TP within one year of IDR. 12800, EV/EBITDA at 7,59x and EV/ha of 7,153 USD/Ha or trading at 19x PER. With 22% upside, we recommend to BUY.
As of 1Q21, AALI recorded a 6.8% YoY decrease in sales volume of CPO and derivatives. However, revenue increased by 5.0% YoY to IDR 5 trillion as a result of an 8.0% YoY increase in average CPO selling prices. Net profit decreased by 56.2% in March 2021 to Rp 162 billion compared to the same period last year due to a significant increase in other expenses, up 763% yoy, coming from losses related to forward selling contracts. In 2021, the increase in CPO prices will support an increase in revenues amid weakening production and sales volumes. But the CPO price increase is blocked by changes in the formulation of the export levy in late 2020 to support the biodiesel program, from a flat tax to progressive. This will reduce the potential price increases for CPO companies including AALI. We are targeting Average Selling Price (ASP) this year to rise 9% YoY to 9300 IDR/kg compared to 8545 IDR/Kg in 2019, covering a decrease in sales volume target of -3% YoY in 2021. Total revenue of CPO 2021 is forecast to increase 5% YoY in 2021.
Valuation: 22% upside
We estimate a TP within one year of IDR. 12800, EV/EBITDA at 7,59x and EV/ha of 7,153 USD/Ha or trading at 19x PER. With 22% upside, we recommend to BUY.
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