PGAS Oct2021

PGAS

Contact our analyst Eka

BUY
6th October 2021
Price Rp 1480
Target price Rp 1960

Expecting higher volume

In 2Q2021, PGAS revenue increased +23% YoY to US$ 731.4 million, driven primarily by a higher contribution from gas distribution which increased +15.7% YoY to US$ 569.5 million and higher net oil and gas sales.
For 1H2021 revenue was slightly lower -0.30% YoY at US$ 1.46 billion.
Commercial sales increased +21.3% MoM in June to 916 BBTUD, as domestic demand recovered further in 2Q2021 and the number of costumers increased.
The trend of industrial consumption has been on an upward trend starting in the 3Q2020 and we are expecting more growth in the coming quarters.

Unexpected Income

PGAS booked net profit of US$ 135 million in 2Q2021 after a loss in 2Q2020 of US$ 41.2 million. Higher net profit was driven by higher profit from joint ventures of US$ 50.5 million up 121% YoY and unexpected other income from a reversal of provisions for tax disputes of US$ 48.3 million.
For 1H2021, PGAS net profit soared 2,883% YoY to US$ 197 million. As of 1H2021, PGAS has won a total of four cases against the tax office with a value of US$ 65.2 million. PGAS had allocated US$ 278 million of provisions for 24 tax cases in 2020.

2Q2021 Margin Increased

Because of a higher net profit in 2Q2021, the net profit margin jumped to 18.4% from negative in 2Q2020 and 8.40% in 1Q2021.
PGAS recorded higher cost of revenue +15% YoY to US$ 482.6 million, which resulted in a higher gross profit by 34% to US$ 201 million and a higher GPM of 34% in 2Q2021 from 27.5% in 1Q2021.
Operating expenses decreased -13% to US$ 134 million, so operating income increased +453% YoY to US$ 115 million. The operating profit margin also increased from 3.5% to 15.7%.
We are expecting a positive net profit in 2021F of US$ 375.4 million after a loss in 2020 as we are expecting more reversals of provisions for tax disputes in 2021.

Valuation: BUY, with TP 1,960

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 14.4%, gives a target price of IDR 1,960 or 31% upside which is a 9x PE valuation within one year.