Buy

5 June 2026

Price Rp 1,630

Target price Rp 2,550

Investment Considerations

Softer Operational Volume Amid Lower Industrial Absorption

• In Q1-2026, PGAS reported revenue of USD 929.6 million, declining 3.8% YoY and 11.7% QoQ, reflecting softer industrial demand and lower operational volumes across several business segments.
• Gas transmission revenue increased 1.8% YoY to USD 59 million, although transmission volume declined 3.9% YoY to 1,539 MMSCFD. Encouragingly, transmission volume showed early signs of recovery in April 2026, reaching 1,709 MMSCFD, up 4.0% MoM. Management maintains its FY2026 transmission volume target of 1,620 MMSCFD.
• Gas trading revenue rose 2.7% YoY to USD 686.8 million, although declining 22.0% QoQ, while trading volume contracted 9.8% YoY to 777 BBTUD. The decline was mainly attributable to distribution constraints in the Duri–Dumai corridor, supply chain disruptions related to geopolitical tensions, weaker industrial demand from the fertilizer and chemical sectors, and seasonal softness during the Eid holiday period.
• However, gas trading volume improved significantly in April 2026, increasing 15.0% MoM to 878 BBTUD, broadly in line with management’s FY2026 target of 877 BBTUD
• The oil and gas segment recorded revenue of USD 61 million, declining 11.6% YoY and 36.4% QoQ, while lifting volume fell to 15,979 BOEPD, mainly due to natural production decline at the Pangkah block.
• In terms of supply composition, 79% of PGAS’ gas supply originated from pipeline gas and 21% from LNG regasification. By source, 35% of supply came from the Pertamina Group, while the remaining 65% was sourced from third parties, including the Corridor Block. HGBT gas accounted for 35% of total gas trading volume, while the remaining 65% was sourced from non-HGBT volumes.
• Looking ahead, management maintains its FY2026 operational guidance, targeting 5% growth in gas distribution volume, 1% growth in transmission volume, 14% decline in regasification volume, 9% growth in oil and gas lifting, flat oil transportation volume, and a 15% decline in LPG processing volume. The outlook is supported by improving monthly volume trends and the gradual normalization of supply and distribution constraints.

Q1 2026 Results: Margin Expansion Drives Earnings Growth

• Despite softer revenue performance, PGAS delivered strong earnings growth, with net profit increasing 46.0% YoY to USD 90.4 million.
• Net profit margin improved to 9.7%, compared with 6.4% in Q1-2025, supported by the depreciation of the Japanese yen against the US dollar, lower tax expenses, and deferred tax benefits.
• Cost of revenue declined 6.6% YoY to USD 771.6 million, resulting in gross profit growth of 12.0% YoY to USD 158.0 million. Consequently, gross profit margin expanded to 17.0%, compared with 14.5% in the corresponding period last year.
• Within the gas distribution business, the average selling price increased 13.8% YoY to USD 9.8/mmbtu, while unit distribution costs rose to USD 7.7/mmbtu. As a result, the distribution spread expanded 38.6% YoY to USD 2.1/mmbtu.
• Management expects to maintain a healthy distribution spread of around USD 1.65–1.85/mmbtu through the remainder of 2026, supported by pricing discipline and an improved sales mix.

Valuation: Maintain BUY, target price of 2,550

• We maintain our BUY recommendation on PGAS with a 12-month target price of IDR 2,550, implying 56% upside potential and a forward PER of 13.0x.
• While operational volumes in Q1-2026 were affected by macroeconomic headwinds, geopolitical disruptions, supply constraints, and weaker industrial demand, PGAS continued to demonstrate earnings resilience through margin expansion, a diversified supply portfolio, and disciplined cost management.
• Our valuation is based on a Discounted Cash Flow (DCF) methodology using a WACC of 11.6%, resulting in a target price of IDR 2,550 per share.