PGAS
Contact our analyst Eka
BUY
14th July 2023
Price Rp 1,340
Target price Rp 2,000
14th July 2023
Price Rp 1,340
Target price Rp 2,000
Double digit revenue growth
1Q2023: Still lower margin but improving
Valuation: BUY, with a target price of 2,000
- PGAS recorded double-digit revenue growth in 1Q2023, of +11.6% to US$ 933.6 million. This increase was primarily driven by higher contributions from gas sales, upstream operations, oil transportation, and others.
- Gas distribution revenues rose by +6.7% YoY to US$ 650 million, while transmission sales experienced a decrease of -6.7% YoY to US$ 53 million, mainly due to increased production and lifting in the Fasken block.
- In terms of gross profit margin, trading and transmission margins declined to 6.3% in 1Q2023 compared to 13.6% in 1Q2022. Exploration and production margins for oil and gas also dropped to 15.4% in 1Q2023 due to higher average costs, while the average gas selling price remained unchanged.
- From January to June 2023, PGAS witnessed a +3.4% YoY increase in gas trading volume, which reached 932 bbtud. Gas transmission volume rose by +4.5% to 1,256 mmscfd, and oil transportation experienced triple-digit growth of +486% YoY, amounting to 160,179 mmboe.
- Considering the strong volume growth in the first five months of 2023, we are targeting PGAS's revenue to reach US$ 3.85 billion for the full year, an +8% growth.
1Q2023: Still lower margin but improving
- PGAS's net profit decreased by 27% YoY to USD 86 million in 1Q2023, with a lower net profit margin of 9.2%. This decline can be attributed to increased upstream production costs, a 76% YoY decrease in foreign exchange gains, and a decrease in the share of profit from joint ventures.
- Cost of revenue increased by 16.3% YoY, primarily due to higher average costs of gas from upstream suppliers in 1Q2023 (US$ 5.82/mmbtu compared to US$ 5.66/mmbtu). However, the consolidated average selling gas price to downstream remained unchanged at US$ 7.40/mmbtu, resulting in a 5% YoY decrease in gross profit to US$ 176.7 million and a lower gross profit margin of 14.9%.
- PGAS's profit decreased annually but showed an improvement from a loss in 3Q2022. For 2023F, we anticipate PGAS's net profit to be US$ 386.4 million, a 18.5% YoY growth.
Valuation: BUY, with a target price of 2,000
- We maintain our recommendation to buy PGAS shares due to its steady performance improvements and expected growth in demand. Our discounted cash flow (DCF) valuation, using a weighted average cost of capital (WACC) of 10.2%, yields a target price of IDR 2,000 per share. This represents 49% upside potential and corresponds to an 8.5x price-to-earnings (PE) valuation within one year.
