Higher Expectations Ahead
Stellar 1Q22 Performance, Thanks to Higher ASP
• ITMG IJ managed to book a stellar performance in 1Q22 with a +125.14% YoY growth on the topline to USD639.93 million, slightly higher than our estimate (reaching 27.09%/25.24% of our/cons FY22E estimates). Higher Coal price supported the rally on ASP (+121% YoY) contributed to the revenue growth. Meanwhile, sales volume was recorded at 4.3 million tons (+4% YoY / -19% QoQ). This was followed by a -5% YoY / -23% QoQ decrease in production volume to 3.8 million tons in 1Q22.
• Costs were also kept under control with efficiencies nearly doubling their gross margin at 52.56% (vs 29.87% in 1Q21), where mining costs only increased +10.89% YoY to USD93.03 million in 1Q22, followed by transportation cost (+11.32% YoY). On the other hand, royalty fees increased significantly +129.49% YoY to USD76.66 million in 1Q22 (vs USD33.40 million in 1Q21).
• OPM increased to 46.88% in 1Q22 (vs 22.44% in 1Q21), thanks to higher revenue and efficiency. Moreover, net profit increased by +407.28% YoY or USD213.18 million in 1Q22 (vs USD179.31 million in 1Q21), followed by NPM at 33.31% (vs 14.78% in 1Q21). We see that ITMG will be supported by an increase in ASP, amid rising commodity prices and limited production of ITMG in FY22E.
Limited Production Volume in The Last 3 Years
• We note that the realized top and bottom line were above our expectations, due to the good performance in 1Q22. However, on a quarterly basis, revenue fell -15.07% QoQ (vs USD753.47 million in 4Q21). Meanwhile, net profit only rose +18.88% QoQ (vs USD179.31 million in 4Q21).
• Coal production reached 4.2 million tons in 1Q22, up +2.43% YoY from 4.1 million tons in 1Q21, with 23% of the MNCS estimate of 18.3 million tons in FY22E. Meanwhile, on a quarterly basis, it decreased by -26,19% QoQ from 5.3 million tons in 4Q21.
• However, we see that production will be quite limited in FY22E as the Kitadin Embalut mine ended the operation in Feb-22, although it will be replaced by Graha Panca Karsa (GPK) located in East Kalimantan. We estimate total production to reach 18.25 - 18.50 million tons in FY22E (vs 18.10 million tons in FY21).
Coal Price remain Uptrend in FY22E
Coal price has been holding on for a long time at USD350/mt, even now it is at USD412/mt growing by +315.74% YoY/+142.92% YTD. We see several catalysts had brought prices back up, such as: 1) The ongoing war between Russia and Ukraine; 2) China's policy to ease the lockdown which has the potential to increase demand; 3) the electricity crisis in India will also affect coal demand. We therefore increased our average price forecast for FY22E to >USD150/mt from USD120/mt as we believe prices remain high for the rest of the year.
Valuation & Recommendation: BUY at Target Price IDR36,300
We maintain our recommendation BUY, with a higher TP: IDR36,300 implies 4.25x/1.84x PE/PBV FY22E. We believe ITMG should deliver a solid performance throughout the year mainly supported by rising coal prices amid higher exposure to export markets. Management will also consider renewable energy sources to capture opportunities in energy growth trends such as the mineral, metal mining, solar panel business.
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