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ADRO

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Significant Upside, BUY
18th November 2022
Current price Rp3580
Target price Rp6850
9M22 Higher Prices
ADRO’s production volume grew 14.5% YoY in 9M22 to 45.37 Mt from 39.64 Mt. Coal sales increased 13.7% YoY to 44.17 Mt from 38.86 Mt in 9M21. The average selling price (ASP) increased by 106% YoY. Coal prices remained near the levels seen in 2Q22, maintained by unfavorable weather and supply constraints as well as geopolitical events. We maintain our coal production volume target for 2022F at 58 Mt compared to 52.70 Mt in 2021A. We believe ADRO will continue to see strong demand from customers despite the various challenges. 


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Improving operating performance
As of 9M22, ADRO booked revenue of USD 5,91 bn, up 130% YoY while bottom line profit increased even more significantly to USD. 1,90 bn, +352% YoY.  In 3Q22, revenue increased by 136% to USD 2,37 bn compared to USD.1,01 bn in 3Q21. Operational EBITDA increased by 231% YoY to USD 3,798 mn. This strong operational EBITDA is reflective of volatile weather patterns, demand for coal from the recovering global economy and geopolitical dynamics driving prices. Cost of revenue increased by 59% YoY to USD. 2,55 mn mainly due to increased royalty expenses due to the higher ASP and higher mining costs as a result of higher global oil prices. Royalties to the Government of Indonesia combined with tax expenses increased by 302% to USD 2,047 mn from USD 510 mn. Based on the terms of an IUPK-KOP, the royalties paid by Adaro Indonesia (Adaro Indonesia’s mine represents 79% of ADRO’s 9M22 production) will increase progressively based on coal selling prices. We estimate 2022-2023F bottom line profit will grow at a compound annual growth rate of 29% to 2023F from 2021A. Going forward, ADRO will continue to improve operations by focusing on efficiency and cost control.

Valuation: significant upside potential
We adjust our estimates based on the 9M22 result and we upgrade our ADRO target price to 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.


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Previously
​ADRO Sep2022
​ADRO Jun2022
​ADRO Mar2022
​ADRO Oct2021
​ADRO Apr2021
​ADRO Dec2020
​ADRO Apr2020
​ADRO
PT. Binaartha Sekuritas

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