PTBA
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36% upside
9 November 2020
Price Rp1990
Target price Rp2700
9 November 2020
Price Rp1990
Target price Rp2700
Sales target revised down
As of 9M20, PTBA’s coal sales decreased 10% YoY to 18,6 mn tons from 20.6 mn tons in 9M19. PTBA is revising their 2020 production and sales volume target from 30.3 mn tons and 29.9 mn tons to 25,1 mn tons and 24,9 mn tons. PTBA's performance up to 9M20 is still affected by the Covid-19 pandemic which led to a decrease in energy consumption due to the lockdowns in export destinations such as China and India. The same happened in the domestic market, the largest market for PTBA. The decrease in electricity consumption in large areas of Indonesia such as DKI Jakarta, Banten, Java and Bali led to a decrease in domestic coal absorption. PTBA continues to work on improving operations so that performance is maintained. We revise down our 2020 revenue target to 27% growth yoy, inline with the revised coal volume target
Progress on railway capacity
PTBA is on track to have additional 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 2Q 2021. In addition, railway capacity of 5 mn tons pa that has been successfully operated at Kertapati since Q1-2020, will increase capacity to 7 mn tons pa by 2021. For future expansion, PTBA is currently doing a joint feasibility study with the state railroad company on the TE – Kramasan route and this will be PTBA’s main project aside from TE – Perajen. The TE - Kramasan railway is to be completed by 2024/2025.
Downstream growth progress
PTBA signed a Coal–Based Methanol supply agreement with Pertamina in March 2020 as part of a downstream gasification project at Tanjung Enim with a production target of 1,4 mn tons p.a. of methanol. PTBA will supply Methanol to Pertamina as part of the Pertamina Gasoline A20 program. Construction preparations for the downstream project are planned to begin in mid-2021 and the target is to begin operations in Q2 2024. Other downstream projects include South Sumatra Mine-8 PLTU with a capacity of 2x60 MW. As of 9M20, progress has reached +/- 55% with a target COD for unit 1 in 4Q20 and unit 2 in 1Q22. PTBA has also been working with PT Angkasa Pura II (AP II) on building and operating a solar power plant (PLTS) at Soekarno-Hatta Airport. This project is in the form of a 720 solar panel system with photovoltaics with a maximum capacity of 241 kilowatt-peak (kWp) and installed in the Airport Operation Control Center Building (AOCC). It is fully operational as of October 1, 2020. The success of this PLTS cooperation prompted PTBA to explore with AP II the construction of PLTS at a number of other airports managed by AP II.
Valuation: 36% upside potential
With WACC at 10,8%, our target price for PTBA is revised down to IDR 2700, which is a valuation of 8,96x PER with 36% upside potential. We maintain our BUY recommendation.
As of 9M20, PTBA’s coal sales decreased 10% YoY to 18,6 mn tons from 20.6 mn tons in 9M19. PTBA is revising their 2020 production and sales volume target from 30.3 mn tons and 29.9 mn tons to 25,1 mn tons and 24,9 mn tons. PTBA's performance up to 9M20 is still affected by the Covid-19 pandemic which led to a decrease in energy consumption due to the lockdowns in export destinations such as China and India. The same happened in the domestic market, the largest market for PTBA. The decrease in electricity consumption in large areas of Indonesia such as DKI Jakarta, Banten, Java and Bali led to a decrease in domestic coal absorption. PTBA continues to work on improving operations so that performance is maintained. We revise down our 2020 revenue target to 27% growth yoy, inline with the revised coal volume target
Progress on railway capacity
PTBA is on track to have additional 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 2Q 2021. In addition, railway capacity of 5 mn tons pa that has been successfully operated at Kertapati since Q1-2020, will increase capacity to 7 mn tons pa by 2021. For future expansion, PTBA is currently doing a joint feasibility study with the state railroad company on the TE – Kramasan route and this will be PTBA’s main project aside from TE – Perajen. The TE - Kramasan railway is to be completed by 2024/2025.
Downstream growth progress
PTBA signed a Coal–Based Methanol supply agreement with Pertamina in March 2020 as part of a downstream gasification project at Tanjung Enim with a production target of 1,4 mn tons p.a. of methanol. PTBA will supply Methanol to Pertamina as part of the Pertamina Gasoline A20 program. Construction preparations for the downstream project are planned to begin in mid-2021 and the target is to begin operations in Q2 2024. Other downstream projects include South Sumatra Mine-8 PLTU with a capacity of 2x60 MW. As of 9M20, progress has reached +/- 55% with a target COD for unit 1 in 4Q20 and unit 2 in 1Q22. PTBA has also been working with PT Angkasa Pura II (AP II) on building and operating a solar power plant (PLTS) at Soekarno-Hatta Airport. This project is in the form of a 720 solar panel system with photovoltaics with a maximum capacity of 241 kilowatt-peak (kWp) and installed in the Airport Operation Control Center Building (AOCC). It is fully operational as of October 1, 2020. The success of this PLTS cooperation prompted PTBA to explore with AP II the construction of PLTS at a number of other airports managed by AP II.
Valuation: 36% upside potential
With WACC at 10,8%, our target price for PTBA is revised down to IDR 2700, which is a valuation of 8,96x PER with 36% upside potential. We maintain our BUY recommendation.
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