DEPOK (eNBe Indonesia) - Shares of Adaro Minerals Indonesia (ADMR) have fallen 57% from their peak last year following correction in coal prices.
While still one of the most ‘valuable’ stocks in the market (over 6x equity), the last quoted price of ADMR reflected PE multiple 11 only on historic 2022 results.
ADMR, subsidiary of Adaro Energy (ADRO), booked net profit of US$335.7 million in 2022, surged 114% year on year (y/y), as revenues jumped 97.4% y/y to US$908 million.
Gross profit surged 123% y/y to US$535 million, and operating profit surged 111% y/y to US$458 million, on the back of 42% higher average selling price (ASP).
ADMR generated operational Ebitda of US$490 million in 2022, 98% higher from US$248 million in 2021. ADMR also recorded 39% higher sales volume last year, which supported the historically strong results.
Despite significant correction of coal price in recent months, ADMR is still an interesting company to watch because of its diversification into aluminium and growing domestic demand for metallurgical coal.
As reported earlier, expansion of metal processing, especially iron and steel, led to substantially higher import of coal (particularly metallurgical coal).
Last year, Indonesia imported US$4.48 billion worth of coal, an increase of 35% from 2021. In January 2023, import of coal skyrocketed to US$421 million from US$151.6 million in the same month last year.
ADMR’s President Director and Chief Executive Officer, Christian Ariano Rachmat said the Company’s strong 2022 performance reflected the favorable market condition as seen in the strong price environment during the year.
He added, ADMR continues to lead the Adaro Group’s transformation and the Company was able to achieve several milestones during last year.
Within one year since ADMR announced its aluminium smelter project, ADMR has signed 2 an offtake MoU and finalized its partners in that project.
For this year, ADMR is guiding for sales volume of 3.8 Mt to 4.3 Mt. ADMR continues to ramp up volume supported by strong demand from customers, in-line with its 6 Mtpa medium-term target.
FY23 strip ratio is targeted at 3.8x, as the company plans to restart operation from PT Lahai Coal, which has higher strip ratio compared with PT Maruwai Coal. Bear in mind that BPH, the previous manager of these assets, planned to produce 10 million tons per annum.
ADMR allocates capital expenditure (capex) for its metallurgical coal business this year, targeted at US$70 million to $90 million, does not include capex for our aluminium smelter.
ADMR expects to achieve financial close for the aluminium smelter in the first half (H1) of 2023.
Earlier ADMR said it it allocated capital expenditure (capex) of US$1.1 billion, equivalent to Rp16.32 trillion, for building aluminium smelter in North Kalimantan Industrial Estate.
Said capex will be financed by equity and bank loan. That said, some banks are ready and standby to provide loan for funding said smelter project with expected annual production capacity of 1.5 million tons.
The first stage’s construction of smelter is targeted to finish by the first quarter (Q1) of 2025, to have production capacity of 500,000 tons per year.
The second stage’s construction is targeted to finish in Q4 of 2026, which also has annual production capacity of 500,000 tons. The last stage’s construction is targeted to finish in Q4 of 2026.
Noting that ADMR claimed itself as a leading metallurgical coal producer with low-cost, efficient operation supported by Adaro Group’s integrated supply chain network.
It has large coal reserves and resources base which supports long-term sustainable growth. Coal reserves reaches 170.7 Mt and coal resources reaches 980 Mt.
ADMR said it has strong demand profile from blue-chip steel companies. Customers are dominated by Asian countries including Japan, China, and India.
Seeing the future development of electric vehicle (EV), ADMR is ready to participate in providing aluminium for the EV’s material and support green economy for sustainable living.
ADMR has positive prospect as demand for metallurgy coal continues to grow alongwith the improving economy, while metallurgy coal is raw material for iron steel (manufacture, transportation, infrastructure) with demand is also growing.
ADMR also has integrated supply chain, from mining area to stockpile, and transshipment area.
ADMR has total coal mining area of 146,579 hectares located in Central Kalimantan and East Kalimantan. Its coal resources reach 980 million tons and coal reserves reach 170.7 million tons (high calorie).***
