PTBA
Contact our analyst Revita
72% upside
15 May 2020
Price Rp1815
Target price Rp3120
15 May 2020
Price Rp1815
Target price Rp3120
Targeting 5% sales volume growth
As of 1Q20, PTBA’s coal sales increased by 3% YoY to 6.8 mn tons from 6.6 mn tons in 1Q19. PTBA is targeting 2020 production and sales volume of 30.3 mn tons and 29.9 mn tons respectively, with domestic coal sales of 21.7 mn tons and export sales of 8.2 mn tons. Amid the current pandemic, PTBA will optimize exports to countries such as India, Hong Kong, Taiwan, Thailand, Vietnam and a number of other Asian countries by maximizing the production of high calorie coal. For the domestic market PTBA will optimize sales to the PLN Group. We estimate 2020 revenue will decline 13% yoy as the current thermal coal price has declined to below USD 60/ton.
Additional railway capacity
PTBA is on progress to have additional 6 mn tons p.a. railway capacity in 2020. An additional 1.3 mn-ton railway capacity in Tanjung Enim (TE) – Kertapati has been completed while an additional 4,7 mn ton p.a. capacity from TE – Tarahan is targeted to be completed by December 2020. For future expansion, PTBA is currently undergoing a joint feasibility study with the state railroad company on the TE – Kramasan route and will be PTBA’s main project aside from TE – Perajen. The TE - Kramasan railway is to be completed by 2024/2025.
Progress on downstream
PTBA signed a Coal–Based Methanol supply agreement with Pertamina in March 2020 as part of downstream gasification project at Tanjung Enim with a production target of 1 mn tons p.a. of methanol. PTBA will supply Methanol to Pertamina as part of the Pertamina Gasoline A20 program. The plant is targeted to start commercial production (COD) in 2025. Other downstream projects include South Sumatra Mine-8 PLTU with a capacity of 2x60 MW. As of 1Q20, progress has reached +/- 35% with target COD for unit 1 in 4Q20 and unit 2 in 1Q22. Rooftop Solar Photovoltaic has entered the commissioning test phase which was temporarily delayed due to the covid-19 pandemic. This project is targeted to start its commercial operation this year.
Valuation: 72% upside potential
With WACC at 11.5%, we are targeting a TP for PTBA of IDR 3120, meaning the share is valued at 8.76x PER with 72% upside potential. We recommend BUY.
As of 1Q20, PTBA’s coal sales increased by 3% YoY to 6.8 mn tons from 6.6 mn tons in 1Q19. PTBA is targeting 2020 production and sales volume of 30.3 mn tons and 29.9 mn tons respectively, with domestic coal sales of 21.7 mn tons and export sales of 8.2 mn tons. Amid the current pandemic, PTBA will optimize exports to countries such as India, Hong Kong, Taiwan, Thailand, Vietnam and a number of other Asian countries by maximizing the production of high calorie coal. For the domestic market PTBA will optimize sales to the PLN Group. We estimate 2020 revenue will decline 13% yoy as the current thermal coal price has declined to below USD 60/ton.
Additional railway capacity
PTBA is on progress to have additional 6 mn tons p.a. railway capacity in 2020. An additional 1.3 mn-ton railway capacity in Tanjung Enim (TE) – Kertapati has been completed while an additional 4,7 mn ton p.a. capacity from TE – Tarahan is targeted to be completed by December 2020. For future expansion, PTBA is currently undergoing a joint feasibility study with the state railroad company on the TE – Kramasan route and will be PTBA’s main project aside from TE – Perajen. The TE - Kramasan railway is to be completed by 2024/2025.
Progress on downstream
PTBA signed a Coal–Based Methanol supply agreement with Pertamina in March 2020 as part of downstream gasification project at Tanjung Enim with a production target of 1 mn tons p.a. of methanol. PTBA will supply Methanol to Pertamina as part of the Pertamina Gasoline A20 program. The plant is targeted to start commercial production (COD) in 2025. Other downstream projects include South Sumatra Mine-8 PLTU with a capacity of 2x60 MW. As of 1Q20, progress has reached +/- 35% with target COD for unit 1 in 4Q20 and unit 2 in 1Q22. Rooftop Solar Photovoltaic has entered the commissioning test phase which was temporarily delayed due to the covid-19 pandemic. This project is targeted to start its commercial operation this year.
Valuation: 72% upside potential
With WACC at 11.5%, we are targeting a TP for PTBA of IDR 3120, meaning the share is valued at 8.76x PER with 72% upside potential. We recommend BUY.
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