EQUITY RESEARCH

ADRO - Result update - 24 August 2023

CIPTADANA SEKURITAS ASIA

BUY Adaro Energy

Earnings declined 27,9%, exceeding our expectation
TP: Rp3,100 (+14.8%)
Sector Coal Softer 2Q23 result due to coal ASP decline…
Adaro Energy (ADRO) saw a decline of 9.2% in 2Q23 earnings, dropping to USD415.8 mn,
Bloomberg Ticker ADRO IJ
due to declining coal prices and higher cost. Revenue posted a drop of 10.8% to
USD1,640.7 mn, largely attributed to a 16.9% decrease in coal ASP. On a positive note, the
Share Price Performance
company’s cost of revenue declined -11.0% and was able to outpace revenue decline
Last price (Rp) 2,700 resulting in GPM to expand by 10bps to 41.6%. However a 15.1% increase in operating
Avg. daily T/O (Rpbn/USDmn) 168.8/11.0
expenses squeezed OPM 160bps to 33.8%. Below operating line, lower tax rate (18% vs
20%) and an USD24.4 mn in other income supported profitability.
3m 6m 12m
Absolute (%) 29.2 -6.6 -22.0
… Leads to earnings to decline 27.9%, still exceeding our expectation
Cumulatively, the company booked net profit of USD873.8 mn representing a 27.9% YoY
Relative to JCI (%) 25.8 -7.4 -18.9 decline, exceeding ours and consensus FY23 expectation at 64.5% and 61.8%. Revenue
52w High/Low price (Rp) 4,250/2,010 inched lower by 1.8%, reaching USD3,479.3 mn due to a decrease in coal ASP, forming
53% of our FY23F. We note that an increase in cost of sales (34.1%) due to higher fuel cost
and royalties to the Government which increased 67% to USD853 mn from USD511 mn in
5,000 40% FY22. This resulted in gross profit to decline by 28.6% YoY to USD1,446.2 mn. This was
30% further exacerbated by a 68.2% increase in operating expenses, which was mainly due to
4,000 20%
10% accrual of non-tax state revenue and regional government revenue, allowance for
3,000
0% government charges, and higher selling and marketing expenses. Together this pushed
2,000 -10% operating profit to fall by 35.9% YoY, forming 62.1% of our FY23F. While a decrease of
1,000 -20% 78.2% in other income weighting profitability.
-30%
- -40%
A brief snapshot on 2H23
Feb-23

May-23
Nov-22
Aug-22

Aug-23

The company is making commendable strides in its pursuit of its FY23F coal production
and sales targets, which was projected to fall within the 62-64 mn ton ranges. This
advancement is underpinned by robust execution spanning all operational sectors, closely
ADRO IJ 1yr Rel. to JCI (RHS) aligning with our initial assumption of 63.6 mn tons. Notably, there have been no revisions
to the company's strip ratio guidance. Enhanced operational efficiency for the remainder
of the year is anticipated, buoyed by more favorable mining conditions. In a significant
Outstanding shrs (mn) 31,986 development last May, the company successfully achieved financial closure for its
aluminum smelter project, securing substantial funding totaling USD1.585 mn and
Mkt. Cap (Rpbn/USDmn) 86,362/5,639
Rp2.5 tn.
Estimated free float (%) 40.6
Maintain Buy with a lower TP of Rp3,100/share
Major shareholders
We slashed FY23F cash cost by 10.7% as we felt our previous assumption to be too
Adaro Strategic 43.9% progressive, concurrently we also tweaked our FY24-25F cash cost to take into account
Thohir Garibaldi 6.2% new BLU royalty laws which decreased our FY24-25F cash cost by 11.1% and 5.2%,
respectively. This resulted in our FY23-25F earnings to increase by 18.3%, 30.4% and
14.0%. At this juncture we roll forward our valuation base to FY24F PE, arriving at a lower
TP of Rp3,100/share (previously Rp3,600.share), derived from PE multiple of 7.4x slightly
EPS Consensus
above +1 standard deviation. We maintain our Buy recommendation on ADRO as our new
Ciptadana Cons. % Diff TP still offers 14.8% upside potential to current share price. We continue to select ADRO as
2023F 5.0 4.2 19.3 one of our top picks on coal sector, with the company having ample reserve life, diverse
portfolio and an integrated mining system.
2024F 2.9 2.9 0.1
2025F 2.5 2.5 1.4 Exhibit 1 : Financial Highlights
Year to 31 Dec 2021A 2022A 2023F 2024F 2025F
Revenue (USDmn) 3,993 8,102 6,566 4,895 4,565
Operating profit (USDmn) 1,585 4,277 2,343 1,301 1,105
Net profit (USDmn) 933 2,493 1,603 929 811
EPS (US$Cents) 2.9 7.8 5.0 2.9 2.5
EPS growth (%) 535.3 167.1 -35.7 -42.0 -12.7
Thomas Radityo EV/EBITDA (x) 2.8 0.6 1.2 1.7 1.4
+62 21 2557 4800 Ext.795 PER (x) 6.5 2.2 3.6 6.3 7.1
radityothomas@ciptadana.com PBV (x) 1.5 0.9 0.8 0.8 0.7
Dividend yield (%) 8.2 11.6 12.9 8.2 4.8
http://www.ciptadana.com ROE (%) 22.6 41.4 23.3 12.7 10.3
Source : ADRO, Ciptadana Estimates

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 EQUITY RESEARCH
ADRO - Result update - 24 August 2023
CIPTADANA SEKURITAS ASIA

Exhibit 2: Financial exhibit

(USD mn) 1H23 1H22 YoY 2Q23 1Q23 QoQ FY23F 1H23/23F
Revenue 3,479.3 3,541.3 -1.8% 1640.7 1838.6 -10.8% 6,566 53.0%
Cost of sales -2,033.1 -1,516.3 34.1% -957.7 -1075.5 -11.0%
Gross Profit 1,446.2 2,025.1 -28.6% 683.0 763.1 -10.5% 2,477 58.4%
Gross Margin 41.6% 57.2% -15.6% 41.6% 41.5% 0.1%

Operating Expenses -240.6 -143.1 68.2% -128.8 -111.9 15.1%

Operating Profit 1205.5 1882.0 -35.9% 554.3 651.2 -14.9% 1,942 62.1%
Operating Margin 34.6% 53.1% -18.5% 33.8% 35.4% -1.6%

Other Income (Expenses) 34.8 159.3 -78.2% 24.4 10.3 135.9%

Pre-tax Profit 1,240.3 2,041.3 -39.2% 578.7 661.6 -12.5%

Tax -244.3 -695.9 -64.9% -108.5 -135.8 -20.1%

Profit Before MI 996.0 1,345.4 -26.0% 470.2 525.8 -10.6%

Minority Interest 122.1 132.7 -8.0% 54.4 67.7 -19.7%
Net Profit/loss 873.8 1,212.7 -27.9% 415.8 458.0 -9.2% 1,355 64.5%
Net Margin 25.1% 34.2% -9.1% 25.3% 24.9% 0.4%

Source: ADRO, Ciptadana Estimates

Exhibit 3: Operational exhibit

1H23 1H22 YoY 2Q23 1Q23 QoQ FY23F 1H23/23F
Coal production (mn tons) 33.4 28.0 19.2% 17.7 15.7 12.9% 63.6 52.6%
Coal sales (mn tons) 32.6 27.5 18.5% 16.9 15.7 7.4% 63.6 51.3%
Coal ASP (USD/ton) 103.9 126.0 -17.5% 94.6 113.8 -16.9% 99.0 104.9%
Cash Cost (USD/ton) 58.7 51.6 13.7% 52.1 66.1 -21.2% 52.9 110.9%
OB removal (mbcm) 129.8 107.1 21.3% 129.8 56.5 130.0% 211.5 61.4%

Source: ADRO, Ciptadana Estimates

Exhibit 4: Earnings revision

2023F 2024F 2025F
in USD mn Old New Chg Old New Chg Old New Chg
Forecast
Revenue 6,566 6,566 0.0% 4,895 4,895 0.0% 4,565 4,565 0.0%
COGS -4,089 -3,687 -9.8% -3,461 -3,118 -9.9% -3,195 -3,048 -4.6%
Gross profit 2,477 2,879 16.2% 1,433 1,777 24.0% 1,370 1,517 10.7%
Gross margin (%) 37.7% 43.8% 6.1% 29.3% 36.3% 7.0% 30.0% 33.2% 3.2%
Operating Profit 1,942 2,343 20.7% 957 1,301 35.9% 958 1,105 15.4%
Operating margin (%) 29.6% 35.7% 6.1% 19.6% 26.6% 7.0% 21.0% 24.2% 3.2%
Net Profit 1,355 1,603 18.3% 712 929 30.4% 711 811 14.0%
Net margin (%) 20.6% 24.4% 3.8% 14.5% 19.0% 4.4% 15.6% 17.8% 2.2%

Coal production (ton) 63.6 63.6 0.0% 64.6 64.6 0.0% 65.5 65.5 0.0%
Coal sales (ton) 63.6 63.6 0.0% 64.6 64.6 0.0% 65.5 65.5 0.0%
Strip ratio 4.3 4.3 0.0% 4.3 4.3 0.0% 4.1 4.1 0.0%
Cash Cost (USD/ton) 59.2 52.9 -10.7% 47.9 42.5 -11.1% 43.0 40.8 -5.2%
Coal ASP (USD/ton) 99.0 99.0 0.0% 72.0 72.0 0.0% 66.0 66.0 0.0%
Source: Ciptadana Estimates

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 EQUITY RESEARCH
ADRO - Result update - 24 August 2023
CIPTADANA SEKURITAS ASIA

Exhibit 5: ESG assessment

Company description Mining Company

Environmental
1. The company conserves flora and fauna by rehabilitating
the watershed area.
2. ADRO is managing mining water and storm water runoffs
in settling ponds, ensuring that they meet the quality
standards before releasing them into the body of water.
3. ADRO manages hazardous chemical waste (B3) by storing
it in an authorized landfill before being transported and
disposed of by an approved third party.
4. Mining involves heavy machinery use, road construction,
and the upheaval of rock structures. Subsequently, the
ecology of a mining area is often damaged or destroyed
during and after use.
5. The company is currently developing methods of power
generation beyond coal, with its planned Kelanis project
solar powered project expansion and purported hydrogen
power project.

Social
1. Establishing Adaro Zero Accident Mindset (AZAM) policy at
every business unit to strengthen the safety culture in
ADRO group to minimize occupational health and safety
hazards.

ESG-related 2. The company possesses an impeccable health and safety

opportunity or risk track record.
assessment 3. ADRO formed a crisis management team to combat the
COVID-19 epidemic
4. ADRO ignites Education (AIC) aims to educate and improve
human resources by integrating knowledge, skills and
character development.

Government
1. ADRO is committed to consistently implementing Good
Corporate Governance (GCG) by upholding transparency,
accountability responsibility and fairness in all of its
business process and activities.
2. ADRO has a BB rating from MSCI environmental, Social
and Governance (ESG) rating.

Source: ADRO, Ciptadana estimates

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 EQUITY RESEARCH
ADRO - Result update - 24 August 2023
CIPTADANA SEKURITAS ASIA

Exhibit 6 - Income Statement

Year to 31 Dec (USDmn) 2021A 2022A 2023F 2024F 2025F
Revenue 3,993 8,102 6,566 4,895 4,565
COGS -2,223 -3,449 -3,687 -3,118 -3,048
Gross profit 1,770 4,653 2,879 1,777 1,517
Oper. expenses -185 -375 -535 -476 -412
Oper. profit 1,585 4,277 2,343 1,301 1,105
EBITDA 2,047 4,755 2,481 1,642 1,451
Interest income 34 48 142 139 140
Interest expense -83 -89 -36 -33 -30
Other income (exp.) -49 240 150 100 100
Pre-tax profit 1,486 4,476 2,600 1,507 1,316
Income tax -458 -1,645 -858 -497 -434
Minority interest -95 -338 -139 -81 -71
Net profit 933 2,493 1,603 929 811

Exhibit 7 - Balance Sheet

Year to 31 Dec (USDmn) 2021A 2022A 2023F 2024F 2025F
Cash & cash equivalent 2,032 4,172 4,071 4,110 4,623
Acct, receivables 455 647 438 584 544
Inventory 126 199 131 201 188
Other curr, asset 226 301 329 279 269
Total current asset 2,838 5,319 4,968 5,173 5,624
Fixed assets - net 2,615 2,485 2,841 2,774 2,682
Other non-curr.asset 1,302 1,700 1,727 1,710 1,707
Total asset 7,587 10,782 10,813 10,936 11,289

ST debt + curr. maturity 271 175 119 69 19

Acct, payable 272 333 505 427 418
Advances received 0 0 0 0 0
Other curr. liab 818 1,939 1,079 932 861
Long term debt 1,337 1,407 1,124 1,008 892
Other non-curr, liab, 430 401 465 449 447
Total liabilities 3,129 4,255 3,292 2,885 2,636
Shareholder equity 4,137 6,025 6,879 7,328 7,860
Minority interest 322 503 642 723 793
Total liab + SHE 7,587 10,782 10,813 10,936 11,289

Exhibit 8 - Per Share Data

Year to 31 Dec(US$Cents) 2021A 2022A 2023F 2024F 2025F
EPS 2.9 7.8 5.0 2.9 2.5
BVPS 0.1 0.2 0.2 0.2 0.2
DPS 1.6 2.0 2.3 1.5 0.9
FCF per share 0.0 0.1 0.0 0.0 0.0

Source : ADRO, Ciptadana Estimates

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 EQUITY RESEARCH
ADRO - Result update - 24 August 2023
CIPTADANA SEKURITAS ASIA

Exhibit 9 - Cash Flow

Year to 31 Dec (USDmn) 2021A 2022A 2023F 2024F 2025F
Net income 933 2,493 1,603 929 811
Depreciation 463 478 138 341 346
Chg in working cap. 138 957 -440 -391 -18
Other 115 67 177 82 72
CF-Oper activities 1,649 3,995 1,479 961 1,211

Capital expenditure -168 -349 -493 -275 -253

Others -461 -739 0 0 0
CF-Investing activities -629 -1,088 -493 -275 -253

Net change in debt 127 -45 -339 -166 -166

Net change in equity 0 0 0 0 0
Dividend payment -497 -650 -748 -481 -279
Other financing -12 45 0 0 0
CF-Financing activities -382 -651 -1,087 -647 -445

Net cash flow 637 2,256 -102 39 513

Cash - begin of the year 1,174 1,811 4,067 3,966 4,005
Cash - end of the year 1,811 4,067 3,966 4,005 4,518

Exhibit 10 - Key Ratios

Year to 31 Dec 2021A 2022A 2023F 2024F 2025F
Growth
Revenue (%) 57.5 102.9 -19.0 -25.5 -6.7
Operating profit (%) 285.2 169.9 -45.2 -44.5 -15.0
Net profit (%) 535.3 167.1 -35.7 -42.0 -12.7
Profitability Ratios
Gross margin (%) 44.3 57.4 43.8 36.3 33.2
Operating margin (%) 39.7 52.8 35.7 26.6 24.2
EBITDA margin (%) 51.3 58.7 37.8 33.5 31.8
Net margin (%) 23.4 30.8 24.4 19.0 17.8
ROA (%) 12.3 23.1 14.8 8.5 7.2
ROE (%) 22.6 41.4 23.3 12.7 10.3
Liquidity Ratios
Current ratio (x) 2.1 2.2 2.9 3.6 4.3
Quick ratio (x) 2.0 2.1 2.8 3.5 4.2
Cash conversion cycle (days) 29.4 32.3 0.0 0.0 0.0
Activity Ratio
Inventory turnover (days) 20.6 21.1 0.0 0.0 0.0
Receivable turnover (days) 31.0 24.8 0.0 0.0 0.0
Payable turnover (days) 22.2 13.6 0.0 0.0 0.0
Solvency Ratio
Interest cover (x) 24.6 53.2 69.9 50.4 48.9
Debt to equity ratio (x) 0.4 0.3 0.2 0.1 0.1
Net debt to equity (x) Net Cash Net Cash Net Cash Net Cash Net Cash

Source : ADRO, Ciptadana Estimates

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 EQUITY RESEARCH
ADRO - Result update - 24 August 2023
CIPTADANA SEKURITAS ASIA

EQUITY RESEARCH

HEAD OF RESEARCH ECONOMIST ANALYST

Arief Budiman Renno Prawira Erni Marsella Siahaan, CFA
Strategy, Automotive, Heavy Equipment, Economist Banking, Hospital
Construction, Oil & Gas and Shipping T +62 21 2557 4800 ext 735 T +62 21 2557 4800 ext 919
T +62 21 2557 4800 ext 819 E prawirarenno@ciptadana.com E siahaanerni@ciptadana.com
E budimanarief@ciptadana.com

ANALYST ANALYST ANALYST

Yasmin Soulisa Gani Thomas Radityo
Property, Plantations Telco, Tower, Media, Technology Coal, Metal Mining
T +62 21 2557 4800 ext 799 T +62 21 2557 4800 ext 734 T +62 21 2557 4800 ext 795
E soulisayasmin@ciptadana.com E gani@ciptadana.com E radityothomas@ciptadana.com

ANALYST ANALYST ANALYST

Putu Chantika Putri Nicko Yosafat Muhammad Gibran
Consumer, Cigarette Retail, Pharmaceutical Cement, Poultry, Toll road
T +62 21 2557 4800 ext 740 T +62 21 2557 4800 ext 760 T +62 21 2557 4800 ext 798
E putriputu@ciptadana.com E yosafatnicko@ciptadana.com E gibranmuhammad@ciptadana.com

TECHNICAL ANALYST RESEARCH ASSISTANT

Asrul Husni Sumarni
T +62 21 2557 4800 ext 780 T +62 21 2557 4800 ext 920
E husniasrul@ciptadana.com E sumarni@ciptadana.com

EQUITY SALES

DIRECTOR OF INSTITUTIONAL EQUITY SALES

Dadang Mulyana
Plaza ASIA Office Park unit 2
Jl. Jend. Sudirman Kav. 59
Jakarta - 12190
T +62 21 2557 4800 ext 838
F +62 21 2557 4900
E mulyanadadang@ciptadana.com

BRANCH OFFICES

JAKARTA - MANGGA DUA SURABAYA

Komplek Harco Mangga Dua Intiland Tower Surabaya
Rukan Blok C No.10 Ground Floor Suite 5 & 6
Jl. Mangga Dua Raya Jl. Panglima Sudirman 101-103
Jakarta - 10730 Surabaya - 60271
T +62 21 600 2850 T +62 31 534 3938
F +62 21 612 1049 F +62 31 534 3886

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 EQUITY RESEARCH
ADRO - Result update - 24 August 2023
CIPTADANA SEKURITAS ASIA

Analyst Certification

Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her personal views about the
companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not
and will not be influenced by any part or all of his or her compensation.

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Disclaimer: This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securities
mentioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and opinions
contained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No representation or
warranty, expressed or implied, is made by PT CIPTADANA SECURITIES or any other member of the Ciptadana Capital, including any other
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