BWPT
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BUY
4th October 2023
Current price Rp 59
Target price Rp 152
4th October 2023
Current price Rp 59
Target price Rp 152
Double-digit Productivity Growth
As of 1H23, BWPT recorded a CPO sales increase of +22.1% YoY, reaching 172,225 MT compared to 141,037 MT in 1H22. Kernel sales volume also rose by +26.3% YoY to 30,075 MT from 23,809 MT in 1H22. Total FFB nucleus production increased by +16.7% YoY to 460,769 MT in 1H23. Overall FFB (nucleus + plasma) production also rose by +16.2% YoY to 533,971 MT. This double-digit growth in production is part of BWPT's focus on core strategic areas and divestment of non-strategic plantations, aimed at maximizing productivity despite decreasing total plantation size. In this pursuit, BWPT divested five subsidiaries in West Kalimantan on June 9, 2023. BWPT deemed the assets of these subsidiaries as non-core and non-strategic for the group. The purpose of the divestment is to bolster cash flow and working capital to enhance the performance of existing plantations in East Kalimantan, Central Kalimantan, South Kalimantan, and Papua. The target for total production of FFB, CPO, and PK in 2023-2024 is to achieve a CAGR of 33%, 27%, and 26%, respectively, compared to 2022A. Going forward, BWPT has no replanting or new planting plans. The focus will be on maximizing the productivity of existing plantations, increasing plant capacity, boosting plant utilization, and constructing KCP (Kernel Crushing Plant) and biogas plants.
As of 1H23, BWPT recorded a CPO sales increase of +22.1% YoY, reaching 172,225 MT compared to 141,037 MT in 1H22. Kernel sales volume also rose by +26.3% YoY to 30,075 MT from 23,809 MT in 1H22. Total FFB nucleus production increased by +16.7% YoY to 460,769 MT in 1H23. Overall FFB (nucleus + plasma) production also rose by +16.2% YoY to 533,971 MT. This double-digit growth in production is part of BWPT's focus on core strategic areas and divestment of non-strategic plantations, aimed at maximizing productivity despite decreasing total plantation size. In this pursuit, BWPT divested five subsidiaries in West Kalimantan on June 9, 2023. BWPT deemed the assets of these subsidiaries as non-core and non-strategic for the group. The purpose of the divestment is to bolster cash flow and working capital to enhance the performance of existing plantations in East Kalimantan, Central Kalimantan, South Kalimantan, and Papua. The target for total production of FFB, CPO, and PK in 2023-2024 is to achieve a CAGR of 33%, 27%, and 26%, respectively, compared to 2022A. Going forward, BWPT has no replanting or new planting plans. The focus will be on maximizing the productivity of existing plantations, increasing plant capacity, boosting plant utilization, and constructing KCP (Kernel Crushing Plant) and biogas plants.
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Back to profit is on track
We maintain our belief that BWPT is on track to return to bottom-line profitability. As evidenced by the performance since 2022A and 1H23, BWPT managed to report a net profit of IDR. 74bn in 1H23, compared to a net loss of IDR. 188bn in 1H22, indicating a sustained return to profitability is imminent. BWPT has even continued to generate positive free cash flow. We adjust our target for 2023F and 2024F to a net profit of IDR. 235bn and IDR. 505bn, respectively, supported by the maturing of plantations.
Valuation: BUY, with higher potential upside
Based on our EV/EBITDA of 11.74X and EV/ha of 10,446 USD/ha, we maintain our BUY recommendation with a higher TP of IDR. 152/share, reflecting a valuation of 9.52X PER. With significant upside potential, we recommend BUY.
We maintain our belief that BWPT is on track to return to bottom-line profitability. As evidenced by the performance since 2022A and 1H23, BWPT managed to report a net profit of IDR. 74bn in 1H23, compared to a net loss of IDR. 188bn in 1H22, indicating a sustained return to profitability is imminent. BWPT has even continued to generate positive free cash flow. We adjust our target for 2023F and 2024F to a net profit of IDR. 235bn and IDR. 505bn, respectively, supported by the maturing of plantations.
Valuation: BUY, with higher potential upside
Based on our EV/EBITDA of 11.74X and EV/ha of 10,446 USD/ha, we maintain our BUY recommendation with a higher TP of IDR. 152/share, reflecting a valuation of 9.52X PER. With significant upside potential, we recommend BUY.
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