ADRO
Contact our analyst Revita
32% Upside, BUY
28th April 2021
Current price Rp1210
Target price Rp1600
Targeting 52-54 Mt coal production
In 2020, ADRO recorded a 6% y-o-y decrease in coal production volume to 54.53 Mt, slightly higher than their revised 2020 guidance of 52-54 Mt. In 2021, ADRO targets coal production volume similar to last year based on the policies of coal importer countries, especially China, and due to global economic uncertainty which will affect coal demand. Coal sales volume in 2020 reached 54.14 million tons, or 9% lower y-o-y. Total overburden volume in 2020 reached 209.48 million bank cubic meters (Mbcm), or down 23% y-o-y, in line with ADRO's guidance to lower the stripping ratio. The stripping ratio in 2020 reached 3.84x, below the 4.30x stripping ratio guidance. Poor weather for most of the year meant it was a challenge for the company to reach its stripping ratio guidance. In 4Q20, ADRO produced 13.43 million tons and sold 13.39 million tons of coal, or down -3% and -8% respectively compared to 4Q19. This year, ADRO will continue to focus on improving operations through cost control, and efficiency amid the uncertainty caused by Covid-19. We estimate that combined with a better ASP in 2021, EBITDA will grow to USD.916 mn or 22% y-o-y growth.
In 2020, ADRO recorded a 6% y-o-y decrease in coal production volume to 54.53 Mt, slightly higher than their revised 2020 guidance of 52-54 Mt. In 2021, ADRO targets coal production volume similar to last year based on the policies of coal importer countries, especially China, and due to global economic uncertainty which will affect coal demand. Coal sales volume in 2020 reached 54.14 million tons, or 9% lower y-o-y. Total overburden volume in 2020 reached 209.48 million bank cubic meters (Mbcm), or down 23% y-o-y, in line with ADRO's guidance to lower the stripping ratio. The stripping ratio in 2020 reached 3.84x, below the 4.30x stripping ratio guidance. Poor weather for most of the year meant it was a challenge for the company to reach its stripping ratio guidance. In 4Q20, ADRO produced 13.43 million tons and sold 13.39 million tons of coal, or down -3% and -8% respectively compared to 4Q19. This year, ADRO will continue to focus on improving operations through cost control, and efficiency amid the uncertainty caused by Covid-19. We estimate that combined with a better ASP in 2021, EBITDA will grow to USD.916 mn or 22% y-o-y growth.
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Other Businesses progress
ADRO’s power plants achieved a solid performance in 2020. PT Makmur Sejahtera Wisesa (MSW) reached an availability factor of 89.8% in 2020, compared to the target of 89%. Meanwhile, PT Tanjung Power Indonesia (TPI) continued its promising performance, having reached an availability factor of 93.7% in 2020, against a target of 78%. At the end of December 2020, the construction progress of PT Bhimasena Power Indonesia’s 2 x 1000 MW power plant has reached 94.7% and is estimated to start operation by the end of 2021. In Water, the project in Kotawaringin Timur, Central Kalimantan, under PT Adaro Tirta Mentaya continues towards its construction completion by the end of December 2020. Commissioning and testing has been completed for all major WTP facilities with some landscaping and supporting facilities work still to be undertaken. Meanwhile, PT Dumai Tirta Persada (DTP) has completed the main first phase of the project, reaching 50 lps, which has started operating since early December 2020.
Valuation: 32 % upside potential
With WACC at 10.5x, we are targeting ADRO to reach IDR. 1600 or trade at 11x PER with 32% upside. We maintain our BUY recommendation.
ADRO’s power plants achieved a solid performance in 2020. PT Makmur Sejahtera Wisesa (MSW) reached an availability factor of 89.8% in 2020, compared to the target of 89%. Meanwhile, PT Tanjung Power Indonesia (TPI) continued its promising performance, having reached an availability factor of 93.7% in 2020, against a target of 78%. At the end of December 2020, the construction progress of PT Bhimasena Power Indonesia’s 2 x 1000 MW power plant has reached 94.7% and is estimated to start operation by the end of 2021. In Water, the project in Kotawaringin Timur, Central Kalimantan, under PT Adaro Tirta Mentaya continues towards its construction completion by the end of December 2020. Commissioning and testing has been completed for all major WTP facilities with some landscaping and supporting facilities work still to be undertaken. Meanwhile, PT Dumai Tirta Persada (DTP) has completed the main first phase of the project, reaching 50 lps, which has started operating since early December 2020.
Valuation: 32 % upside potential
With WACC at 10.5x, we are targeting ADRO to reach IDR. 1600 or trade at 11x PER with 32% upside. We maintain our BUY recommendation.
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ADRO
