PTBA
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40% upside, BUY
21st May 2021
Price Rp2160
Target price Rp3025
21st May 2021
Price Rp2160
Target price Rp3025
Sales target revised up
As of 1Q21, PTBA’s coal sales decreased 13,9% YoY to 5,9 mn tons from 6,8 mn tons in 1Q20. PTBA is revising their 2021 production and sales volume target to 29,5 mn tons and 30,7 mn tons. This represents an increases of production and sales from 2020’s 24.8 mn tons and 26.1 mn tons. Although in 1Q21 there was a decrease in sales, this was due to high rainfall in Tanjung Enim that constrained operations. PTBA remains optimistic that 2Q21 production will improve in line with improved weather and better working hours. Coal demand is also increasing in the domestic and global markets, especially from China, this can be seen from the sales breakdown per 1Q21 which is better than 2020. PTBA continues to work on improving operations and to make efficiencies so that performance is maintained. We estimate revenue growth of 24% yoy, inline with the revised coal volume target.
Higher rail capacity
PTBA is on track to have additional railway capacity in 2021, consisting of an upgrade to 5 mn tons capacity in Tanjung Enim (TE) – Kertapati which has been completed in 1Q20 and will be increased to 7 mn ton p.a. in 3Q21. For TE – Tarahan-1, an upgrade to 25 mn-ton is targeted to be completed by 3Q 2021. For future expansion, PTBA is currently doing a joint feasibility study with the state rail company on the TE – Kramasan route and this will be PTBA’s main project aside from TE – Perajen. TE- Kramasan with 20 mn-ton capacity is planning to start commercial operation in 1Q24 while TE- Tarahan-2 with 20 mn-ton capacity will start commercial operation in 2025.
Power Plant progress
PTBA’s Coal–Based Methanol supply agreement with Pertamina and Air Product Chemical Inc as part of a downstream gasification project at Tanjung Enim has signed a cooperation agreement in Feb 2021. It will use 6 mn tons of coal to produce a target of 1,4 mn tons p.a. of methanol. Commercial operation is targeted for 2Q 2024. For the Power plant, South Sumatra Mine-8 PLTU with a capacity of 2x60 MW; as of 1Q21, progress has reached +/- 75,6% with a target commercial operation for unit 1 in 4Q20 and unit 2 in 1Q22.
Valuation: 40% upside potential
Our target price for PTBA is revised up to IDR 3,025, which is a valuation of 8x PER with 40% upside potential. We maintain our BUY recommendation.
As of 1Q21, PTBA’s coal sales decreased 13,9% YoY to 5,9 mn tons from 6,8 mn tons in 1Q20. PTBA is revising their 2021 production and sales volume target to 29,5 mn tons and 30,7 mn tons. This represents an increases of production and sales from 2020’s 24.8 mn tons and 26.1 mn tons. Although in 1Q21 there was a decrease in sales, this was due to high rainfall in Tanjung Enim that constrained operations. PTBA remains optimistic that 2Q21 production will improve in line with improved weather and better working hours. Coal demand is also increasing in the domestic and global markets, especially from China, this can be seen from the sales breakdown per 1Q21 which is better than 2020. PTBA continues to work on improving operations and to make efficiencies so that performance is maintained. We estimate revenue growth of 24% yoy, inline with the revised coal volume target.
Higher rail capacity
PTBA is on track to have additional railway capacity in 2021, consisting of an upgrade to 5 mn tons capacity in Tanjung Enim (TE) – Kertapati which has been completed in 1Q20 and will be increased to 7 mn ton p.a. in 3Q21. For TE – Tarahan-1, an upgrade to 25 mn-ton is targeted to be completed by 3Q 2021. For future expansion, PTBA is currently doing a joint feasibility study with the state rail company on the TE – Kramasan route and this will be PTBA’s main project aside from TE – Perajen. TE- Kramasan with 20 mn-ton capacity is planning to start commercial operation in 1Q24 while TE- Tarahan-2 with 20 mn-ton capacity will start commercial operation in 2025.
Power Plant progress
PTBA’s Coal–Based Methanol supply agreement with Pertamina and Air Product Chemical Inc as part of a downstream gasification project at Tanjung Enim has signed a cooperation agreement in Feb 2021. It will use 6 mn tons of coal to produce a target of 1,4 mn tons p.a. of methanol. Commercial operation is targeted for 2Q 2024. For the Power plant, South Sumatra Mine-8 PLTU with a capacity of 2x60 MW; as of 1Q21, progress has reached +/- 75,6% with a target commercial operation for unit 1 in 4Q20 and unit 2 in 1Q22.
Valuation: 40% upside potential
Our target price for PTBA is revised up to IDR 3,025, which is a valuation of 8x PER with 40% upside potential. We maintain our BUY recommendation.
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