Please consider the rating criteria & important disclaimer
with the hike of 30.5% into USD79.7 per ton in ASP. The hike in ASP aligned
with the high prices of global coal. The annual ASP was USD73.1 per ton.
We estimate that in 2018, ASP is capable of hiking slightly
into USD76.5
per ton due to the long
-
term stability in the global coal prices.
High
Stripping Ratio
: Potent Driver for Upbeat COGS
COGS picked up by 35.0% y
-
y from USD272 million in 4Q16 into USD367
million in 4Q17. The incline in COGS occurred
amid the decline in sales
volume from 6.7 million ton in 4Q16 into 6.6 million ton in 4Q17.
The incline in COGS was dominated by the increment of 44.9% y
-
y from
USD116 million in 4Q16 into USD168 million in 4Q17 in the mining cost.
The high stripping ratio (SR) heightened the mining cost. In 4Q17,
Indominco Mandiri (IM), one of ITMG mining posted SR of 13.3x (vs 6.9x in
4Q16), and ITMG’s other mining, namely Bharinto posted SR of 12.4x (vs
5.7x in 4Q16).
Target Price IDR31,125
Deeper Mining Activity
Indominco Mandiri (IM) is ITMG’s biggest mining. In 4Q17, IM contributed 54.2% from
the total production, and posted SR of 13.3x higher than 4Q16’s SR of 6.9x. In 2018,
ITMG projected the hike in SR of its mining, for instance, the projection of hike of 14.5x
in 1Q18’s SR of IM mining.
Other than the projection of hike in SR of IM mining, ITMG also has projected the hike in
1Q18’s SR of its respective mining, such as the hike of 13.3x in SR of Trubaindo (vs 9.4x in
4Q17); 12.5x in SR of Kitadin Embalut (vs 10,4x in 4Q17); 6.5x in SR of Jorong (vs 5,4x in
4Q17), and 9.3x in SR of Bharinto (vs 12,4x in 4Q17).
The high stripping ration will heighten the mining cost, for instance, in 4Q17, ITMG
posted the hike of 44.9% y
-
y into USD168 million in the mining cost. As of note, the
mining cost with the portion of 45% is the biggest component of ITMG’s COGS.
A Glance at ITMG
Indotambangraya Megah (ITMG) as the subsidiary of Banpu Inc. Thailand is one of big
scaled coal miners in Indonesia as it focuses its mining concession in Kalimantan Island
and has the average production capacity of 22
-
29 million ton per year. Its biggest sales
portion is export to Japan, China, and India, while its domestic sales portion is only at the
average of 10%
-
12% from the total sales.
Performance Highlights
Sales Destination |
4Q17
Source: Company, NHKS research
Domestic Sales Portion |
1Q16
-
4Q17
Source: Company, NHKS research
Indominco Mandiri’s Stripping Ratio |
1Q16— 1Q18E
Source: Company, NHKS research
Mining Cost (USD mn) |
1Q16— 4Q17
Source: Company, NHKS research
Production & Sales Volume (mn ton) |
1Q16
-
4Q17
Source: Company, NHKS research
ASP (USD/ton) |
1Q16— 4Q17
Multiple Valuation
Forward P/E band
| Last 1 year
Source: NHKS research
Dynamic Forward P/E band
| Last 1 year
Source: NHKS research
Rating and target price update
Target Price Revision
Date
Rating
Target Price
Last Price
Consensus
vs Last Price
vs Consensus
12/15/2017
Buy
25,275
20,450
24,927
+23.6%
+1.4%
03/07/2018
Hold
31,125
28,675
33,170
+8.5%
-
6.2%
Source: NHKS research, Bloomberg
Closing and Target Price
Source: NHKS research
Analyst Coverage Rating
Source: Bloomberg
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1.
Period: End of year target price
2.
Rating system based on a stock’s absolute return from the date of publication
Buy
: Greater than +15%
Hold
:
-
15% to +15%
Summary of Financials
DISCLAIMER
This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees, and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for errors, omissions, misstatements, negligence, inaccuracy arising herefrom.
In USD mn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 25.9% 36.1% 33.1% 34.0%
