ADRO
Contact our analyst Revita
Significant Upside, BUY
20th February 2023
Current price Rp2840
Target price Rp6850
Record production in 2022FY
In 2022FY, ADRO’s production volume grew 19% YoY to 62.88 Mt from 52.70 Mt in 2021FY. Coal sales increased 19YoY to 61.34 Mt from 51.58 Mt in 2021FY. This is the highest figure above the level of 60 million tons over the last 10 years and surpassed ADRO’s initial target for 2022. Coal production in 4Q22 increased by 34% YoY to 17.52 Mt, the highest quarterly production for ADRO. The record production was due to better availability of heavy equipment, and improved demand from both domestic and export markets. In addition ADRO was able to secure long term volume contracts with its customers. Despite higher volume in 2022, We maintain our target for 2023 coal production volume at 59 Mt and coal sales at 58.41 Mt. Going forward, we believe ADRO will continue to see strong demand from customers despite various challenges.
In 2022FY, ADRO’s production volume grew 19% YoY to 62.88 Mt from 52.70 Mt in 2021FY. Coal sales increased 19YoY to 61.34 Mt from 51.58 Mt in 2021FY. This is the highest figure above the level of 60 million tons over the last 10 years and surpassed ADRO’s initial target for 2022. Coal production in 4Q22 increased by 34% YoY to 17.52 Mt, the highest quarterly production for ADRO. The record production was due to better availability of heavy equipment, and improved demand from both domestic and export markets. In addition ADRO was able to secure long term volume contracts with its customers. Despite higher volume in 2022, We maintain our target for 2023 coal production volume at 59 Mt and coal sales at 58.41 Mt. Going forward, we believe ADRO will continue to see strong demand from customers despite various challenges.
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Forecasting 29% compound profit growth
We maintain our estimates for 2023F revenue and EBITDA, based on our coal production and selling price estimates, at close to our initial targets, after the impressive 2022 performance. We maintain our forecast Royalty payments to the Government of Indonesia and tax expenses as previously. Based on the terms of the IUPK-KOP, the royalties paid by Adaro Indonesia will increase progressively based on coal selling prices. We believe this year coal selling prices will be lower than 2022F. We maintain our 2022-2023F bottom line profit growth target at a compound annual rate of 29% for 2023F from 2021A. Going forward we expect ADRO will continue to improve operations by focusing on efficiency and cost control.
Valuation: significant upside potential
Despite higher coal production volume in 2022, we maintain our ADRO target price at IDR 6,850 which translates to a 9.4x PER with new adjustment to the USD/IDR exchange rate. With significant upside, we maintain our BUY recommendation.
We maintain our estimates for 2023F revenue and EBITDA, based on our coal production and selling price estimates, at close to our initial targets, after the impressive 2022 performance. We maintain our forecast Royalty payments to the Government of Indonesia and tax expenses as previously. Based on the terms of the IUPK-KOP, the royalties paid by Adaro Indonesia will increase progressively based on coal selling prices. We believe this year coal selling prices will be lower than 2022F. We maintain our 2022-2023F bottom line profit growth target at a compound annual rate of 29% for 2023F from 2021A. Going forward we expect ADRO will continue to improve operations by focusing on efficiency and cost control.
Valuation: significant upside potential
Despite higher coal production volume in 2022, we maintain our ADRO target price at IDR 6,850 which translates to a 9.4x PER with new adjustment to the USD/IDR exchange rate. With significant upside, we maintain our BUY recommendation.
Previously
ADRO
