ITMG
Contact our analyst Revita
Targeting 22% upside. BUY
29th December 2022
Price Rp 39800
Target price Rp 48,850
29th December 2022
Price Rp 39800
Target price Rp 48,850
Production Target 17 mn tons
ITMG’s 9M22 coal production was down -7.52% YoY to 12.3mn tons from 13.3 mn tons in 9M21. 3Q22 production alone still achieved the target of 4.6mn tons despite challenging weather caused by heavy rainfall affecting all mine sites. Coal sales volume declined -6.76% YoY to 13.8 mn tons in 9M22. The 4Q22 production target is slightly higher at 4.7mn tons supported by the expansion area in Bharinto and an expected improvement in contractor performance. The average selling price (ASP) in 3Q22 increased to USD 210/ton, +4% QoQ or 90% YoY as coal prices remain strong due to global supply-demand dynanmics and geopolitics. Assessing our targets after the 9M22 result, we still maintain our estimate for ITMG’s coal production volume for this year at 17mn tons. Going forward we believe demand for coal will remain strong, and we estimate production volume will increase in 2023.
ITMG’s 9M22 coal production was down -7.52% YoY to 12.3mn tons from 13.3 mn tons in 9M21. 3Q22 production alone still achieved the target of 4.6mn tons despite challenging weather caused by heavy rainfall affecting all mine sites. Coal sales volume declined -6.76% YoY to 13.8 mn tons in 9M22. The 4Q22 production target is slightly higher at 4.7mn tons supported by the expansion area in Bharinto and an expected improvement in contractor performance. The average selling price (ASP) in 3Q22 increased to USD 210/ton, +4% QoQ or 90% YoY as coal prices remain strong due to global supply-demand dynanmics and geopolitics. Assessing our targets after the 9M22 result, we still maintain our estimate for ITMG’s coal production volume for this year at 17mn tons. Going forward we believe demand for coal will remain strong, and we estimate production volume will increase in 2023.
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Maintaining high margin
Net profit in 9M22 was USD 893 mn, higher than the full year 2021FY’s USD 476 mn or an increase of 235% YoY. The increase in bottom line profit came from higher coal prices along with good cost management, despite royalty and fuel price increases. From a higher ASP, royalty payments surged to USD 32/ton in 3Q22 from USD 13/ton in 3Q21, but production costs in 9M22 were still manageable at USD 51.1/ton compared to USD 40.2/ton in 9M21. Going forward, we expect cost control will help ITMG maintain production costs at this level. We estimate ITMG’s bottom line margin in 2023F will continue to be high at 29% compared to 23% in 2021FY as we assume a still high ASP, albeit lower than the current price.
Solid cash flow
ITMG’s cash continued to increase in 9M22 to USD 1.25 bn compared to USD 509.9 mn in 9M21. This is driven by the net cash generated from operating activities which in 3Q22 increased by 4X YoY. Operating cash flow during 9M22 increased 141% YoY. With cost efficiency and prudent management, we believe this solid performance in terms of cash flows will continue into the future.
Valuation: 22% upside potential
We revised our TP for ITMG of IDR 48,850, which would mean the shares valued at 5,55x PER with 22% potential upside We recommend BUY.
Net profit in 9M22 was USD 893 mn, higher than the full year 2021FY’s USD 476 mn or an increase of 235% YoY. The increase in bottom line profit came from higher coal prices along with good cost management, despite royalty and fuel price increases. From a higher ASP, royalty payments surged to USD 32/ton in 3Q22 from USD 13/ton in 3Q21, but production costs in 9M22 were still manageable at USD 51.1/ton compared to USD 40.2/ton in 9M21. Going forward, we expect cost control will help ITMG maintain production costs at this level. We estimate ITMG’s bottom line margin in 2023F will continue to be high at 29% compared to 23% in 2021FY as we assume a still high ASP, albeit lower than the current price.
Solid cash flow
ITMG’s cash continued to increase in 9M22 to USD 1.25 bn compared to USD 509.9 mn in 9M21. This is driven by the net cash generated from operating activities which in 3Q22 increased by 4X YoY. Operating cash flow during 9M22 increased 141% YoY. With cost efficiency and prudent management, we believe this solid performance in terms of cash flows will continue into the future.
Valuation: 22% upside potential
We revised our TP for ITMG of IDR 48,850, which would mean the shares valued at 5,55x PER with 22% potential upside We recommend BUY.
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