LSIP
Contact our analyst Revita
19% upside, Hold
15th December 2023
Current price Rp 885
Target price Rp1055
15th December 2023
Current price Rp 885
Target price Rp1055
In 3Q23 production grew quarterly by double digit
As of 9M23, Total FFB nucleus and CPO production decreased by -1% YoY and –4% YoY, respectively, to 853,000 tonnes and 216,000 tonnes, inline with lower FFB production of -2.2%. However, in 3Q23, FFB nucleus and CPO production increased by 29% and 24%, respectively, compared to 2Q23. Palm kernel production volume during 9M23 decreased by -2% YoY. LSIP’s total oil palm planted area as of 9M23 increased to 91,675 hectares (ha) from 90,574 ha in 9M22. Meanwhile, the total planted area, including rubber in 9M23, was 111,852 ha, up from 110,643 ha in 9M22. CPO extraction rate and palm kernel extraction rate during 9M23 were 21.7% and 6.3%, respectively. We estimate FFB and CPO production in 2023 will grow by -4% and -1%, respectively, inline with the 9M23 result. CPO and PK extraction rates will be 22.49% and 6.27%, respectively, inline with lower CPO and palm kernel production.
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Higher bottom line in 3Q23
In 9M23, LSIP revenue decreased by -4% YoY from IDR 3.04 trillion to IDR 2.92 trillion. The decrease in revenue is in line with the lower average selling prices of palm products (CPO & PK), partly offset by higher sales volume of palm products. As of 3Q23, LSIP was able to book a significant bottom-line net profit increase of 453.6% QoQ as LSIP was able to lower their COGS and operating expenses by -15.4% QoQ and -118.5% QoQ, respectively. LSIP maintained its healthy financial position with no bank loans as of 9M23. We estimate the bottom-line profit in 2023-2024FF will reach an average growth CGAR of-18% compared to 2022FY due to lower revenue, cost control and efficiency improvements and lower average selling prices. Going forward, we estimate CPO prices will not rise higher than the current price as we expect supply and demand in the market to normalize.
Valuation: 19% upside
We estimate a TP within one year of IDR 1,055, which is EV/EBITDA of 2.46x and EV/ha of 2,065 USD/Ha or trading at 10.10x PER. With 19% upside, we recommend to HOLD.
In 9M23, LSIP revenue decreased by -4% YoY from IDR 3.04 trillion to IDR 2.92 trillion. The decrease in revenue is in line with the lower average selling prices of palm products (CPO & PK), partly offset by higher sales volume of palm products. As of 3Q23, LSIP was able to book a significant bottom-line net profit increase of 453.6% QoQ as LSIP was able to lower their COGS and operating expenses by -15.4% QoQ and -118.5% QoQ, respectively. LSIP maintained its healthy financial position with no bank loans as of 9M23. We estimate the bottom-line profit in 2023-2024FF will reach an average growth CGAR of-18% compared to 2022FY due to lower revenue, cost control and efficiency improvements and lower average selling prices. Going forward, we estimate CPO prices will not rise higher than the current price as we expect supply and demand in the market to normalize.
Valuation: 19% upside
We estimate a TP within one year of IDR 1,055, which is EV/EBITDA of 2.46x and EV/ha of 2,065 USD/Ha or trading at 10.10x PER. With 19% upside, we recommend to HOLD.
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