PGAS
Contact our analyst Eka
BUY
21st March 2024
Price Rp 1,285
Target price Rp 1,630
21st March 2024
Price Rp 1,285
Target price Rp 1,630
Expecting modest growth for 2024
Q4 2023 Results: Margin improvement
Valuation: Maintain BUY, with a lower target price of 1,630
- 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.