Unleashing the Potential to Strengthen its Competitiveness
AKRA's 1H21 Result Beat Estimates
• Consolidated revenue grew by 7.05% to IDR10.71tn in 1H21, largely driven by the growth of the trading & distribution segment as well as the contribution of the SEZ JIIPE Gresik, Java Timur.
• AKRA managed to distribute 46%-48% of FY21E targets at around 2.5mn kl petroleum. We expect a stronger volume trend will intensify in 2H21E, assuming the vaccination roll-out continues to pick up, translating to a firm economic recovery.
• Gross profit increased by 6.67% YoY to IDR1.09tn (vs IDR1.02tn).
• AKRA recorded a solid operating profit growth by +14.87% YoY to IDR747.67bn, translated into higher OPM to 7% in 1H21 vs 6.5% in 1H20. The Company continues to strictly maintain operational costs as well as working capital to remain efficient.
• Consolidated revenue grew by 7.05% to IDR10.71tn in 1H21, largely driven by the growth of the trading & distribution segment as well as the contribution of the SEZ JIIPE Gresik, Java Timur.
• Net profit significantly increased by 27.53% YoY to IDR550.39bn, slightly above consensus/ ours estimates, implying 53% of FY21E target. Net margin slightly higher by 83bps in 1H21, thanks to the lower financial cost.
• The Company's solvency ratio is relatively stable with a DER level of 0.30x in 1H21. The management has also kept the Company's net gearing low at 0.11x. With a strong balance sheet and cash flow, the Company is confident that it can run investment projects without interruption.
Earnings set to improve double-digit in FY21E
• Despite the challenges and risks, management cautious optimism about trade and distribution segment this year, as economies are set for recovery after the pandemic and international trade becomes more robust. We strongly believe the solid performance should continue in FY21E.
• Thus, we estimate AKRA will be able to secure 2.53-2.77 mn kl (+9%-10% YoY) of petroleum sales volumes in FY21E/FY22F, mainly supported by the increasing demand from the coal mining industry together with new customers from the smelter industry, palm oil, and other mining sectors. Meanwhile, we believe the chemical segment will gradually pick up in FY21E supported by JV AKR-Petronas.
• We are also confident of strong margin expansion supported by sales from the industrial estate project going forward. Hence, we set our top-line target at 12.99%/16.28% YoY to IDR1.04tn/IDR1.24tn in FY21E/FY22F.
• Meanwhile, earnings could significantly pick up to 13.34%/18.39% YoY in FY21E/FY22F, in line with management targets of 12%-15% in FY21E.
Maintain BUY with Unchanged TP: IDR4,200
We maintain our BUY recommendation for AKRA with a target price of IDR4,200 (+20% upside), implies an FY21E PE of 15.87x and EV/EBITDA of 9.64x or slightly above +0.5STD of its 3-years mean. We expect AKRA to gain a good momentum this year align with a healthy recovery on trading and distribution businesses and potential opportunity on JIIPE SEZ. Downside risks to our call include: 1) slower than expected growth due to pandemic; 2) unfavorable changes in government regulation.
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