Company Update

07 November 2022

INDY IJ - MNC Sekuritas Equity Report November 7, 2022

Strive to Grow More Sustainably


INDY Looks to Diversify Further in Non-Coal Businesses

• INDY is currently pursuing a more sustainable resource as the coal business is getting louder (88% of its revenue). To achieve this, INDY has reduced its coal revenue to 50% by 2025 and diversified its businesses through non-coal businesses, such as logistics and infrastructure, minerals, green businesses, digital ventures, and others.

• Despite its aim for non-coal business, INDY's coal business continues to savor the high coal prices. Kideco remained the primary contributor (75% of its revenue), followed by Indika Resources, a combination of Multi Tambangjaya Utama (MUTU) and coal trading (13%).

• The 69.8% divestment of Petrosea (PTRO) represents another concrete development for reducing exposure in coal business, in line with the commitment to achieve balanced revenue between coal and non-coal by 2025.


Promoting ESG Initiatives

• With the world currently progressing towards more sustainable energy, the government is aiming for Indonesia to be the EV production hub in ASEAN. Thus, INDY, through its subsidiary PT Mitra Motor Group (MMG), established a joint venture with Foxtec Singapore Pte Ltd, a company affiliated with Hon Hai Precision Technology (Foxconn). MMG planned to launch 2W EVs by 3Q22, namely Alva One. Furthermore, INDY is also eyeing on developing 4W EVs as well as electric buses.

• Furthermore, collaborating with Fourth Partner Energy Limited, INDY through EMITS planned to develop its own hybrid solar power plant with a capacity of 12 MWp solar PV and a 3 MWh battery system. The plant later should commence its operation in Jun-23 with twenty years of contract period. The company segments its market into three different groups, which are commercial and industrial (C&I), off-grid, and sales to PLN.

• We note that the diversification strategy should benefit INDY to maintain its long-term performance, given that the coal-related business is getting high ESG pressure.


Solid Earnings Driven by Higher Coal Prices

• In 1H22, INDY IJ posted +66.5% YoY revenue growth to USD1.94 bn (vs USD1.16 bn in 1H21) driven by higher coal prices with average ICI-4 benchmark has increased to USD89.2/ton (+86.7% YoY).

• Cost of Contracts and Goods Sold increased by 40.2% YoY. Kideco’s cash costs including royalties increased by 34.3% YoY to USD46.5/ton compared to USD34.7/ton in 1H21 due to: 1) higher royalty as a result of higher ASP; 2) higher fuel rate; and 3) higher stripping ratio (5.3x in 1H22 vs 5.1x in 1H21).

• Meanwhile, net profit grew +1.571% YoY to USD200.65 mn (vs USD12 mn in 1H21). This was in line with the increase in revenue accompanied by cost efficiency, where the company's GPM and NPM were recorded at 34.50% and 10.35%, respectively (vs 22.23% and 1.03% in 1H21).

• We note that strong results were mainly supported by the significant increase in Kideco’s ASP to USD81.5/ton (+67.9%), offsetting the 5.9% YoY decline in sales volume to 17mn tons.


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