PGAS Nov2021

PGAS

Contact our analyst Eka

BUY
17th November 2021
Price Rp 1500
Target price Rp 2170

Upstream business Jump

In 3Q2021, PGAS revenue increased +16% YoY or +9% QoQ to US$ 789 million, driven by a higher contribution from upstream which increased 140% YoY or +170% QoQ to US$132 million. Upstream growth comes from higher crude oil prices.
For 9M2021 revenue grew +4.8% YoY to US$ 2.25 billion driven by higher upstream revenues, +65% YoY.
Distribution increased slightly +2.2%YoY or +14% QoQ to US$ 573 million in 3Q2021 due to a domestic demand recovery and and an increase in the number of costumers which led to higher sales volume.
Transmission also grew +20% YoY to US$ 132 million.
We are expecting better 4Q2021 revenue growth as mobility has started to increase due to the easing of PPKM to level 1 and the continued upward trend of industrial consumption.

3Q2021 Margin Increase

PGAS booked net profit in 3Q2021 of US$ 89.5 million which is a jump of 92% YoY but still lower by -34% QoQ,. The net profit margin increased to 11.3% from 6.85% in 3Q2020. For 9M2021, PGAS net profit reached US$286.1 million which is a jump of 436% YoY with a strong NPM of 12.7%.
PGAS still recorded higher cost of revenue +16% YoY or 9% QoQ to US$ 528 million, while gross profit grew 16% YoY to US$ 261 million with a stable GPM of 33% in 3Q2021.
Share of profit from JVs increased significantly, +121% YoY to US$ 75.1 million in 9M2021 and US$ 25 million in 3Q2021, up 108% YoY. Profit before tax grew +53% YoY to US$ 131.7 million in 3Q2021.
We are expecting a positive net profit in 2021F of US$ 375 million after a loss in 2020 as we are expecting more reversals of provisions for tax disputes in 2021 plus the upstream segment continues to grow.

Valuation: BUY, with TP 2,170

We maintain our recommendation to buy as we expect the upward trend to continue and as we are expecting a positive net profit in 2021F.
Our DCF valuation with WACC at 13%, gives a target price of IDR 2,170 or 45% upside which is a 9.5x PE valuation within one year.