United Tractors (UNTR) – Downgrade to Hold
Price: Rp22,450 – Target Price: Rp23,700
Hampered by heavy rainfall
- As of 9M10, net income was flat compared to 9M09 due to significant increase on COGG but this result is in line with our projection.
- Revenue was mainly supported by increasing sales volume in heavy equipment, offset by lower revenue of mining business.
- In mining business, company has sold 1.9 mn ton coal or grew by 9.2%, but due to rupiah, revenue of mining decreased 4%.
- Until today management will not pass the increase of PAMA cost production to customer.
- We roll over our base year to 2011 and we change our WACC with new price target Rp23,700 (17.1x PE11) from previously. Rp21,500. But we downgrade our recommendation to Hold as our price target only offers 5.5%.