Robust Earnings Growth Promises Strong Dividend
1H22 Performance Beat Our Estimation
• ITMG IJ managed to book an excellent performance in 1H22 with a +110.19% YoY growth on the topline to USD1.42 billion, higher than our estimate (reaching 52.41%/43.63% of our/cons FY22E estimates).
• Higher Coal price still supported the rally on ASP (+134.40% YoY) contributed to the revenue growth. Meanwhile, sales volume was recorded at 8.1 million tons or decreased -9.69% YoY (vs 9 million tons in 1H21).
• This kept OPM at 47.09% in 1H22 (vs 26.66% in 1H21) due to higher revenue.
• Moreover, Net profit increased significantly by +292.29% YoY or USD460.63 million in 1H22 (vs USD117.45 million in 1H21), followed by an increase in NPM at 32.40% (vs 17.36% in 1H21).
Coal Prices Remain High USD400/mt
• Coal price stood at USD435/mt growing +145.07% YoY/+156.49% YTD on (04/09). We see the increase in coal prices will continue at least until the beginning of 2023.
• We increased our ASP forecast ITMG for FY22E to USD180-195/mt (vs USD150/mt previously).
Calculating Impact of Rising Royalty Rates and Fuel Price
• The government has set an increase in coal royalty rates which will take effect on Sept-22. However, the increase in royalty rates has no impact on ITMG.
• The increase of the subsidized fuel prices do not have a significant impact on the company's performance, although ITMG's fuel costs increased +105.69% YoY to USD16.88 million in 1H22.
Valuation & Recommendation: BUY at Target Price IDR51,500
We maintain our recommendation BUY, with a higher TP: IDR51,500 implies 4.53x/2.52x PE/PBV FY22E. We believe ITMG's performance will be supported by the rising demand from China's industrial activities despite a flat production due to bad weather. In addition, ITMG has consistently distributed dividends in the last 5 years with an average dividend yield of 9%.
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