PGAS Mar2024

PGAS

Contact our analyst Eka

BUY
21st March 2024
Price Rp 1,285
Target price Rp 1,630

Expecting modest growth for 2024

PGAS's Q4 2023 performance exhibited single-digit revenue growth of +6.4%, reaching USD 956 million. For FY 2023, revenue also increased slightly by +0.6% YoY or +6.7% QoQ to USD 3.65 billion. This stability in revenue is attributed to positive growth in both upstream and distribution revenue.
Gas distribution saw an increase of +5.5% YoY or +5.7% QoQ to USD 685 million, whereas transmission sales experienced a decrease of -60% YoY to USD 15 million in Q4 2023. Nonetheless, oil and gas revenue increased by +26% YoY to USD 123 million.
In terms of gross profit margin, both trading and transmission margins rose to 10.7% in Q4 2023. Margins for exploration and production of oil and gas also climbed to 30% in the same quarter.
For 2024F, PGAS is targeting modest growth, with gas trading volume expected to grow by +3%, transmission by +4%, and regasification by +22% due to higher demand, while upstream lifting is anticipated to decline by -8% as some blocks experienced a decline in 2023.

Q4 2023 Results: Margin improvement

PGAS's net profit saw a substantial increase of +389% YoY or +37% QoQ to USD 76.4 million in Q4 2023, along with an improved net profit margin of 8.0%.
This boost can be attributed to a lower cost of revenue, down by -0.7% YoY, and higher revenue in Q4 2023, despite operating expenses increasing by +20.6% QoQ to USD 58.6 million.
The result was an improvement in margins, with the operating margin reaching 15.6%, up from 12.1% the previous year, and the gross profit margin expanding to 21.7% from 18.7%.
Regarding the force majeure notice for the LNG sales and purchase agreement with Gunvor Singapore Ltd, the sale and purchase agreement with Gunvor LNG (2024-2027) is still ongoing, likely leading to a new arrangement as a result of coordination and negotiation. Meanwhile, PGAS is exploring the possibility of procuring LNG from alternative suppliers to fulfill Gunvor's contract. In terms of penalties, PGAS has provisioned a total of USD 68.4 million, estimated to cover the incurred penalties.

Valuation: Maintain BUY, with a lower target price of 1,630

We maintain our recommendation to buy PGAS shares following the performance improvement in Q4 2023. Our discounted cash flow (DCF) valuation, employing a weighted average cost of capital (WACC) of 10.85%, yields a target price of IDR 1,630 per share. This represents a 27% upside potential and corresponds to a 7.6x price-to-earnings (PE) ratio within one year.