Contact our analyst Revita

17.5% Upside, HOLD

28th November 2023

Current price Rp2600

Target price Rp3050

Production grows in 9M23
ADRO experienced an 11.8% growth in production in 9M23. The production volume reached 50.73 Mt, up from 45.37 Mt in 9M22. Notably, 2Q23 saw a significant +13% QoQ growth, but in 3Q23, production declined -2.3% QoQ. Coal sales volume rose by +11.2% YoY to 49.12 Mt. This surge was attributed to improved heavy equipment availability and increased demand from domestic and export markets. Based on 9M23 results, we adjust our 2023 target for coal production to 64 Mt and sales to 62.08 Mt. Despite challenges, we anticipate continued strong demand and volume growth for ADRO.

Lower 9M23 Performance
ADRO’s 9M23 revenue was $4,981 mn, a -16% YoY decrease compared to 9M22, primarily due to a -25% YoY decrease in the average selling price (ASP). Cost of revenues increased +17% YoY to $2,993 mn, driven by a +33% YoY increase in royalty expenses to $1,169 mn. Total mining expenses rose +18% YoY, with fuel costs increasing +18% YoY in line with a +33% increase in fuel consumption. With a decrease in top-line and increased costs, ADRO’s 9M23 net profit was $1,219 mn, down -36% YoY. As fluctuating coal prices normalize, we estimate ADRO’s 2023-2024 bottom line profit will decline at a CAGR of -21% compared to 2022A.

Valuation: 17.5% upside potential
Based on 9M23 results, we revise our ADRO target price to IDR 3,050, translating to a 4.08x PER with adjustments to the USD/IDR exchange rate. With +17.5% upside potential, we maintain our HOLD recommendation.