Company Update

17 November 2023

PGEO IJ - MNC Sekuritas Equity Report November 17, 2023

Untapping the Heat Beneath Our Feet

Key Takeaways :
▪️ PGEO faces strong growth impetus from the green-transition momentum, being directly under the government's wing. Their quick wins project pipeline will yield a total of 340MW new self-operated capacity by 2027, in addition to the upcoming projects in Kenya, undertaking a 140 MW powerplant in Longonot with AGIL, with its COD planned in 2027, and another that has set in plan a 300MW power plant in Suswa with GDC.

▪️ PGEO performed exceptionally well in 9M23; their top line has improved 11.9% YoY to USD308.9mn. The OPM was higher at 69.9% due to the increase in finance income and foreign exchange gain by 2,519.4% YoY and 34.1% YoY, respectively. The EBIT jump (31.1% YoY) also hoisted the bottom line by 30.1% YoY to USD133.5mn, leaving the NPM at a staggering 43.2% (vs 38.8% in 9M22), or achieving 95.3% of our FY23E forecast, thus prompting us to up-revise this year’s estimate by 8.7% to USD153.2mn.

▪️ Throughout 2019 – 2022, they have achieved on average above c. 80% of capacity factor, higher than that of USA’s industry average (69%). We project firm’s revenue to grow by a CAGR of 11.5% during the 2022 – 2028F period. OPM/NPM are both projected to grow at a 3.1%/3.7% CAGR, leaving PGEO with an impressive net profit CAGR of 15.6% within the same time frame.

▪️ Along its expansionary cycle, PGEO is still poised to deliver above-industry-average profitabilties; its average NPM/ROE/ROA/ROIC throughout 2023E-2028F are projected to outperform its global peers’s historical average by 146%/26%/67%/4%.

▪️ We initiate coverage on PGEO with a BUY call with the target price of IDR1,830/share (+46.4%), implying FY23E/FY24F P/E of 32.1x/37.0x, PBV of 3.5x/3.3x, and EV/EBITDA of 17.2x/15.8x. The firm’s EV/MW amounts to USD8.27mn/MW, which is actually at a 124% premium compared to its peers, but justifiably so as it is on a speedy mission towards growing its geothermal power capacity. Considerable risk factors includes: delays in the expansionary phase of exploration and drilling, as well the potentiality of natural disasters to disrupt operations.

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