DEPOK (eNBe Indonesia) - Shares of Adaro Energy Indonesia (ADRO), the second largest coal producer in Indonesia, gained 2.7% to Rp3,070 on Friday (Mar 3) as market participants responded positively the company’s performance last year.
Like other coal stocks, however, ADRO has retreated significantly from peak last year.
The last quoted price reflected PE multiple 2.5 only, nothing compared to market average. ADRO is now valued on par its equity (Rp98 trillion), very cheap for a company with return on equity (ROE) of more than 40%.
ADRO booked profit attributable to owners of US$2.49 billion in 2022, surged 125% year on year (y/y), as revenues surged 107% y/y to US$8.1 billion.
ADRO’s operational Ebitda surged by 139% to US$5.03 billion and core earnings surged by 140% to US$3.01 billion due to continuation of historically strong pricing and sales volume.
The Company’s average selling price (ASP) jumped by 74% y/y on the back of strong coal price environment.
Then, ADRO’s contribution to the Government of Indonesia through royalty combined with income tax expense in 2022 surged 222% y/y to US$2.87 billion.
ADRO generated US$2.769 million of free cash flow in 2022, representing a 118% rise y/y despite capex increasing by 119% to US$424 million.
ADRO said its balance sheet remains healthy with a net cash position of US$2,599 million, and total cash position jumped by 125% y/y to US$4,067 billion.
The company paid out US$650 million of cash dividends last year, but anticipating substantially higher this year.
ADRO’s sales volume in 2022 rose 19% y/y to 61.34 million tons (Mt). Its coal production also rose 19% to 62.88 Mt. In the fourth quarter (Q4) of 2022, ADRO’s coal production grew 34% to 17.52 Mt.
Boy said ADRO is guiding coal sales volume of 62 Mt to 64 Mt for this year, consisting of 58 Mt to 60 Mt of thermal coal, and 3.8 Mt to 4.3 Mt of metallurgical coal from its subsidiary Adaro Minerals Resources (ADMR).
“We expect volume from ADMR, Balangan Coal Companies and PT Mustika Indah Permai to increase in 2023. This figure does not include the target of Kestrel mine of 6 Mt. Strip ratio in 2023 is expected to be 4.2x,” Boy said.
ADRO is allocating US$400 million to US$600 million of capital expenditure (capex) this year, used for routine capex and expansion of, primarily, mining, services, and logistics businesses.
This capex does not include capex for our business transformation projects in Kaltara (North Kalimantan).
Riding on the coal bonanza, ADRO made US$345 million of other investments in 2022 against US$113 million in 2021. The company also spent US$382 million for fixed assets, higher than US$153 million it spent in 2021.
Meanwhile state coal producer bukit asam (PTBA) booked profit attributable to owners of Rp12.5 trillion in 2022, grew 50% y/y, as revenues rose 44.8% y/y to Rp42.6 trillion.
Cost of goods sold increased 50% y/y to Rp24.7 trillion, then gross profit rose 38.4% y/y to Rp17.9 trillion.
PTBA is now valued higher than ADRO, about 1.6x equity and traded with PE multiple 4.
PTBA’s operational performance was solid along with the global economic recovery, also domestic economic improvement, which led to growing demand over coal.
The momentum of significant jump in global coal prices also supported a surge in PTBA’s earning.
PTBA said 64% of 2022 sales are in contract, and it opened new markets, especially to European countries due to high demand. While sales to India, Japan, and South Korea increased significantly.
PTBA used net cash of Rp8.66 trillion for funding activities during 2022, compared to Rp911.58 billion only a previous year, as PTBA paid dividend of Rp7.9 trillion.
But high cash from operations boosted its cash and cash equivalents to Rp7.03 trillion from earlier Rp4.39 trillion. PTBA’s liabilities reached Rp16.44 trillion while assets was Rp45.35 trillion. Then the equity was Rp28.91 trillion.
But the higher coal royalty mights pressure earnings of coal producers, including PTBA. But this would be compensated by expected high coal prices. New royalty was applied in September 15, 2022.***