ITMG
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Targeting 17% upside. HOLD
1 Feb 2021
Price Rp 12250
Target price Rp 14400
1 Feb 2021
Price Rp 12250
Target price Rp 14400
Targetting 19,1mn tons production
ITMG cut their coal production target in 2020 to 19,1mn tons from their previous target of 23,6 millions tons. In 3Q20, total production was below target due to heavy rainfall in the Indominco sites. But we expect in 4Q20, output from 2 of ITMG sites, Indominco and Bharinto will be higher to help achieve the annual target. In terms of sales, ITMG has set a sales volume target of 21,6 millions tons -14,6% yoy from 25,3 millions tons in 2019FY. In 3Q20, ITMG sold 15,4 million tons of coal which was sold in China (3,6 million tons), Japan (3.5 million tons), Indonesia (2.9 million tons), Bangladesh (0.4 million tons), Thailand (0.9 million tons), India (0.7 million tons), Philippines (1.3 million tons) and other countries in East and Southeast Asia. During 3Q20, ITMG had a 19% lower average selling price of USD 54 from USD 66 per ton a year ago. The sharp drop in coal prices was due to seasonally lower coal demand, further impacted by the pandemic. ASP in 4Q20 is expected to shadow the price recovery trend. Net Income in 3Q20, still showed a down trend following the previous quarters. We maintain our sales and production volume targets for 2020 and 2021F with slight adjustments. We expect in 2021 the market, particularly exports will improve if the vaccine is successful. We estimate net income during 2020F and 2021F at USD. 60 mn and USD.116 mn respectively.
ITMG cut their coal production target in 2020 to 19,1mn tons from their previous target of 23,6 millions tons. In 3Q20, total production was below target due to heavy rainfall in the Indominco sites. But we expect in 4Q20, output from 2 of ITMG sites, Indominco and Bharinto will be higher to help achieve the annual target. In terms of sales, ITMG has set a sales volume target of 21,6 millions tons -14,6% yoy from 25,3 millions tons in 2019FY. In 3Q20, ITMG sold 15,4 million tons of coal which was sold in China (3,6 million tons), Japan (3.5 million tons), Indonesia (2.9 million tons), Bangladesh (0.4 million tons), Thailand (0.9 million tons), India (0.7 million tons), Philippines (1.3 million tons) and other countries in East and Southeast Asia. During 3Q20, ITMG had a 19% lower average selling price of USD 54 from USD 66 per ton a year ago. The sharp drop in coal prices was due to seasonally lower coal demand, further impacted by the pandemic. ASP in 4Q20 is expected to shadow the price recovery trend. Net Income in 3Q20, still showed a down trend following the previous quarters. We maintain our sales and production volume targets for 2020 and 2021F with slight adjustments. We expect in 2021 the market, particularly exports will improve if the vaccine is successful. We estimate net income during 2020F and 2021F at USD. 60 mn and USD.116 mn respectively.
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18,7% lower cost in 3Q20
ITMG has controlled cash spending by cutting costs in each department during the pandemic. As of 3Q20, production costs were 34 USD/tons -9.3% yoy, +18,7% QoQ, inline with production growth. The strip ratio was lower QoQ,, from 1Q20 10,7x, 2Q20 10,8x, to 3Q20 10x. We expect the 4Q20 strip ratio to be 9,1x. We believe a lower strip ratio, lower fuel costs from a low oil price and further cost cutting, will help ITMG to reduce the cost of production to help manage any unexpected conditions.
Valuation: 17% upside potential
We have a TP for ITMG of IDR 14,400, which would mean the shares valued at 10x PER with 17% potential upside. We recommend HOLD.
ITMG has controlled cash spending by cutting costs in each department during the pandemic. As of 3Q20, production costs were 34 USD/tons -9.3% yoy, +18,7% QoQ, inline with production growth. The strip ratio was lower QoQ,, from 1Q20 10,7x, 2Q20 10,8x, to 3Q20 10x. We expect the 4Q20 strip ratio to be 9,1x. We believe a lower strip ratio, lower fuel costs from a low oil price and further cost cutting, will help ITMG to reduce the cost of production to help manage any unexpected conditions.
Valuation: 17% upside potential
We have a TP for ITMG of IDR 14,400, which would mean the shares valued at 10x PER with 17% potential upside. We recommend HOLD.
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