ADRO
Contact our analyst Revita
65% Upside, BUY
6th September 2022
Current price Rp4040
Target price Rp6700
1H22 Higher Prices
ADRO’s production volume grew 6% YoY in 1H22 to 28.01 Mt from 26.49 Mt. Coal sales increased 7% YoY to 27.49 Mt from 25.78 Mt in 1H21. The average selling price (ASP) increased by 117% YoY. The increase in coal prices was driven by unfavorable weather and supply chain issues. 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 various challenges.
ADRO’s production volume grew 6% YoY in 1H22 to 28.01 Mt from 26.49 Mt. Coal sales increased 7% YoY to 27.49 Mt from 25.78 Mt in 1H21. The average selling price (ASP) increased by 117% YoY. The increase in coal prices was driven by unfavorable weather and supply chain issues. 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 various challenges.
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Improving operating performance
As of 1H22, ADRO booked revenue of USD 3,54 bn, up 127% YoY while bottom line profit increased even more significantly to USD. 1,21 bn, +613% YoY. In 2Q22, revenue increased by 166% to USD 2,3 bn compared to USD.871 mn in 2Q21. Operational EBITDA increased by 305% in 2Q22 to USD 1,6 bn compared with USD 391 mn in 2Q21. Net profit was up to USD.905 mn from USD. 116 mn in 2Q21. We estimate 2022-2023F net profit will grow at a compound annual growth rate of 28% to 2023F from 2021A. Cost of revenue increased 43% YoY despite higher royalty expenses which increased 184% YoY as a result of the higher ASP. In 1H22, Royalties to the Government of Indonesia reached USD 511 million compared to USD.179,9 million in 1H21. Going forward, ADRO will continue to improve operational excellence, focusing on efficiency and cost control. We estimate the Net profit margins during 2022-2023 will average 55%
Debt under control
ADRO in 1H22 managed to achieve a significantly higher cash balance of USD 2.24 billion and a healthy balance sheet, with net debt (cash) in 1H22 at USD. (770 mn). Cash increased from higher operating cash flows and carefully managed spending. During 1H22, cash flows from operating activities increased 238% to USD 1.36 billion compared to USD. 401 mn in 1H21, mainly driven by an increase in receipts from customers.
Valuation: 65% upside potential
We adjust our estimates based on the 1H22 result and we upgrade our ADRO target price to IDR 6,700 which translates to a 10x PER. With 65% upside, we maintain our BUY recommendation.
As of 1H22, ADRO booked revenue of USD 3,54 bn, up 127% YoY while bottom line profit increased even more significantly to USD. 1,21 bn, +613% YoY. In 2Q22, revenue increased by 166% to USD 2,3 bn compared to USD.871 mn in 2Q21. Operational EBITDA increased by 305% in 2Q22 to USD 1,6 bn compared with USD 391 mn in 2Q21. Net profit was up to USD.905 mn from USD. 116 mn in 2Q21. We estimate 2022-2023F net profit will grow at a compound annual growth rate of 28% to 2023F from 2021A. Cost of revenue increased 43% YoY despite higher royalty expenses which increased 184% YoY as a result of the higher ASP. In 1H22, Royalties to the Government of Indonesia reached USD 511 million compared to USD.179,9 million in 1H21. Going forward, ADRO will continue to improve operational excellence, focusing on efficiency and cost control. We estimate the Net profit margins during 2022-2023 will average 55%
Debt under control
ADRO in 1H22 managed to achieve a significantly higher cash balance of USD 2.24 billion and a healthy balance sheet, with net debt (cash) in 1H22 at USD. (770 mn). Cash increased from higher operating cash flows and carefully managed spending. During 1H22, cash flows from operating activities increased 238% to USD 1.36 billion compared to USD. 401 mn in 1H21, mainly driven by an increase in receipts from customers.
Valuation: 65% upside potential
We adjust our estimates based on the 1H22 result and we upgrade our ADRO target price to IDR 6,700 which translates to a 10x PER. With 65% upside, we maintain our BUY recommendation.
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ADRO
