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ITMG

Contact our analyst Revita
Targeting 6% upside. HOLD
25th August 2020
Price Rp 8250
Target price Rp 8775

Production down -22%
As of 1H20 coal production achieved 8,9 millions tons or down -22% yoy. In 3Q20, production output will be maintained with a lower strip ratio target of 9.7x compared to 10,8x in 2Q20.  In terms of sales volume in 2Q20, ITMG sold 11.1 million tons of coal, including to China (3.2 million tons), Japan (2.6 million tons), Indonesia (1.9 million tons), Philippines (0.8 million tons), Thailand (0.7 million tons) and other countries in East and Southeast Asia. During 2Q20, ITMG booked a lower average selling price down 19% from USD 68,8 per ton to USD 55,8 per ton on a year‐on‐year basis. As a result of a lower average selling price, net income in the period shrank by 59% to USD 29 million from USD 69 million in the first semester last year. With most sales being exports (average 86%) and lower coal price estimates, we adjust our average net income growth during the next two years to -5,22% CAGR.



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Strategic plan maintained
As we  mentioned in previous reports ,ITMG will implement a disciplined cash expenditure strategy by conducting cost cuts in each department and is ready to do further cost optimization if necessary. As of 2Q20, production costs were 43,1 USD/tons, down 15% QoQ inline with production growth. As of 1H20, average production cost was 46,9 USD/tons compared to 54,2 USD/ton. We believe, in the coming quarters, as long as there is no major disruption, ITMG will be able to reduce the cost of production with disciplined cost control and capital expenditure control. In this way, the company can maintain a strong cash position.

Valuation: 6% upside
Based on adjustments after the 1H20 result and USD conversion, We are targeting a TP for ITMG  of IDR 8775, or a valuation of 5,8x PER with 6% upside potential. We recommend maintain  HOLD.
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Previously
​ITMG Jun2020
PT. Binaartha Sekuritas

Setiabudi Atrium, Jl. HR Rasuna Said No.62, RT.18/RW.2, Karet Kuningan, Setia Budi, Jakarta Selatan, DKI Jakarta 12920
+62215206678 | email: kyc.online@binaartha.com

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