PTRO
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44% upside. BUY
21st January 2022
Price Rp2150
Target price Rp3090
21st January 2022
Price Rp2150
Target price Rp3090
Double digit growth from contract mining
As of 9M21, contract mining revenue grew +44% YoY supported by an increase in overburden volume (OB) +30% YoY and coal production of 24% YoY, while revenue from other businesses declined on a YoY basis. The increase in contract mining gave PTRO’s total revenue an increase of +20.67% YoY to USD 301.59 million from USD 249.93 million in 9M20. Contract mining was the largest contribution to PTRO’s revenue at 72.5% in 9M21 compared to last year’s, 60.7%. As a whole PTRO’s long term contracts have durations averaging 5-7 years. An additional 2 new contracts from a new clients, PT Kartika Selabumi Mining with an average contract duration of 7 years (USD 182.45 million) and PT Hardaya Mining Energy & Central Cipta Murdaya (USD 264.78 million), will further increase contract mining revenue. We estimate Contract Mining revenue growth of 31% CAGR 2020A to 2022F.
Digitalization and diversification
PTRO continues to implement a digital transformation strategy that began in 2018, to strengthen productivity and efficiency. In addition, PTRO is continuing to diversify their mining contract business into non-coal projects. PTRO has signed an addendum to their cooperation agreement with PT Mekko Metal Mining with a 5-year contract worth USD 100 Million for a bauxite project located in West Kalimantan. Previously PTRO had also entered into gold business projects through its shareholder, PT Indika Energy Tbk (INDY) after INDY took over a 72% stake in Nusantara Resources Limited (NUS) which is managing Awak Mas gold mine project.
Maintain margin
Despite higher costs in 9M21 as a result of pre-operation costs to support new projects in coal and minerals, we believe PTRO through its cost effectiveness and liability management strategy, will be able to maintain net margin as it has done historically. As of 9M21, net profit margin was 4.76% compared to 5.20% in 9M20. We estimate the net profit margin will average 10.7% during 2021-2022F.
Valuation: 44% upside
We estimate a TP within one year of IDR. 3090, which is a valuation of 4.20x PER, with 44% upside, our recommendation is BUY.
As of 9M21, contract mining revenue grew +44% YoY supported by an increase in overburden volume (OB) +30% YoY and coal production of 24% YoY, while revenue from other businesses declined on a YoY basis. The increase in contract mining gave PTRO’s total revenue an increase of +20.67% YoY to USD 301.59 million from USD 249.93 million in 9M20. Contract mining was the largest contribution to PTRO’s revenue at 72.5% in 9M21 compared to last year’s, 60.7%. As a whole PTRO’s long term contracts have durations averaging 5-7 years. An additional 2 new contracts from a new clients, PT Kartika Selabumi Mining with an average contract duration of 7 years (USD 182.45 million) and PT Hardaya Mining Energy & Central Cipta Murdaya (USD 264.78 million), will further increase contract mining revenue. We estimate Contract Mining revenue growth of 31% CAGR 2020A to 2022F.
Digitalization and diversification
PTRO continues to implement a digital transformation strategy that began in 2018, to strengthen productivity and efficiency. In addition, PTRO is continuing to diversify their mining contract business into non-coal projects. PTRO has signed an addendum to their cooperation agreement with PT Mekko Metal Mining with a 5-year contract worth USD 100 Million for a bauxite project located in West Kalimantan. Previously PTRO had also entered into gold business projects through its shareholder, PT Indika Energy Tbk (INDY) after INDY took over a 72% stake in Nusantara Resources Limited (NUS) which is managing Awak Mas gold mine project.
Maintain margin
Despite higher costs in 9M21 as a result of pre-operation costs to support new projects in coal and minerals, we believe PTRO through its cost effectiveness and liability management strategy, will be able to maintain net margin as it has done historically. As of 9M21, net profit margin was 4.76% compared to 5.20% in 9M20. We estimate the net profit margin will average 10.7% during 2021-2022F.
Valuation: 44% upside
We estimate a TP within one year of IDR. 3090, which is a valuation of 4.20x PER, with 44% upside, our recommendation is BUY.
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