Adaro Energy (ADRO) – Maintain BUY
Price: Rp2,125 – Target Price: Rp2,500
Un-seasonal Rainfall Hit Production
- Adaro’s net profit came in at Rp1,696 bn, dropped by 52% YoY in 9M10, with revenue down 9.7% to Rp18,075 bn. Revenue and net profit represents only 56% and 42% of our FY10 target.
- Quarterly performance improved, with revenue and net income increased by 8% qoq and 85.9% qoq, respectively in 3Q10.
- Adaro’s disappointing results were mainly due to unusually heavy rainfall that affected coal production and higher than normal demurrage charges.
- We cut our FY10 production target to 42 mn ton (from 45 mn ton), inline with management’s guidance.
- Wara mine will become future additional revenue, as growth in Tutupan mine will be moderate in the next few years.
- We revised down our projection and roll over to end FY11 with new price target Rp2,500 (from Rp2,600), implies 14.6x PER’11.
- We see further upside from Maruwai coking coal project that we haven’t factor into our projection.
- MAINTAIN BUY