Coal Sector

12 July 2024 | Equity Research | Commodities Sector

Sector Update Not Out of Steam Yet

OVERWEIGHT 1H24F Preview; ADRO and ITMG might beat consensus but in-line with ours estimate
1 2M P RICE P ERFORMANCE
Considering that most coal companies under our coverage will report 1H24F earnings next
(IDR) (%) month, our preliminary calculation for 1H24F, looking at average 2Q24 Newcastle coal price of
38,000 25.0
USD138/t (+8.3% QoQ), suggests that we might see better-than-expected results for ADRO and
36,000 20.0
34,000 ITMG, as earnings could conceivably beat consensus, while staying relatively in line with our
15.0
32,000
10.0
forecast. Meanwhile, PTBA is potentially reported below both our estimate and that of street.
30,000
5.0 However, we do expect a stronger coal price in 2H24F:
28,000
26,000
- 1. ADRO: Revenue and earnings are probably in line with ours, but above consensus
24,000 (5.0)
estimate. Revenue could reach 51.4% of our forecast and 59.1% of consensus, and
(10.0)
22,000
earnings should achieve 51.9% of our estimates and 71.7% of consensus, these
20,000 (15.0)
Jul-23 Oct-23 Jan-24 Apr-24 numbers driven by lower cash costs and greater volume. See Exhibit 3.
.BCASCO (LHS) Rel. to JCI performance (RHS)
2. ITMG: Revenue and earnings probably above ours and consensus’ estimate. Revenue
Source: Bloomberg
could reach 45.6% of our forecast and 50.8% of consensus and earnings should
achieve 50% of our estimates and 55.9% of consensus, all driven by lower cash costs
and greater volume. See Exhibit 4.

3. PTBA: Revenue and earnings will likely miss ours and consensus’ estimate, with
revenue probably only achieving 46.6% of our forecast and 49% of consensus, and
MARKET DATA
earnings 34.3% of our estimates and 37.4% of consensus. Cash costs probably not
YTD 1M 3M 12M
going to decline as fast as those of ADRO and ITMG. We might downgrade our forecast
Absolute 1.4% 5.6% -4.8% 3.2%
and target price, depending on 1H24F results, if indeed PTBA misses our estimates.
JCI Return 0.4% 6.5% 0.2% 7.2%
See Exhibit 5.
Relative 1.1% -0.8% -5.0% -4.0%
Source: Bloomberg Consensus earning revision should be a catalyst for ADRO and ITMG share price to extend
their rally; ITMG still lagging far behind ADRO

As of this writing, ADRO and ITMG share price performed +21.1% and -0.58% YTD, a stellar
performance relative to LQ45 Index (which sank 6.5% YtD). Up to now, we see ADRO and ITMG
S TOCK COVERAGE as the safest pick for positioning in coal sector; a positive earnings surprise from upgrade of
CP TP P/E (x) consensus forecast should allow these stocks to further extend their rally. We also note that
Ticker Rating
(IDR) (IDR) 2024F ITMG share price performance continue to lag, compared to ADRO, despite 20% growth in ITMG
ITMG BUY 25,500 35,700 6.0 production for this year, resulting from soft 1Q24 numbers previously. ADRO already posted
PTBA BUY 2,550 3,580 7.4 better-than-expected numbers in 1Q24, following low consensus expectation, and yet ADRO
ADRO BUY 2,860 3,610 4.6 will beat consensus’ number again in 1H24F, as no forecast has yet been meaningfully
Source: Bloomberg, BCA Sekuritas upgraded.
We adjudge consensus numbers for both ADRO and ITMG as too conservatives, and we thus
expect consensus to start upgrading their forecast post-1H24 result. Note that the street still
relies on average Newcastle assumption at USD120/t for its coal price vs. ours at USD140/t.
Average Newcastle price for 1H24 already reached USD132/t. We see 2H24F coal price
Muhammad Fariz
direction remaining elevated, as La Niña is already on the horizon, and coal price historically
muhammad.fariz@bcasekuritas.co.id trades at a higher price during this weather event. While we should expect lower coal price in
+6221 23587222 ext 11103 July and August (summer season), we only expect average monthly coal price volatility
between +/- USD1-3/t, before it rallies from September onwards, as we move into the wet
season and winter.

Valuation: Maintain Our Overweight

We reiterate our OVERWEIGHT rating on Coal sector. At this juncture, for now we change our
pecking order to ITMG>ADRO>PTBA from ITMG>PTBA>ADRO, but its higly probable that PTBA
could be revised down, while ITMG and ADRO forecast could be maintained. All in all, we
maintain our Buy rating and TP for all coal counters under our coverage; our 2024F TP and
ratings are: ADRO maintain BUY rating and TP of IDR3,610/sh, ITMG maintain BUY with TP of
IDR35,700/sh, PTBA maintain BUY with TP of IDR3,580/sh.

muhammad.fariz@bcasekuritas.co.id
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Coal Sector | Not Out of Steam Yet

Exhibit 1. Sector valuation and pecking order

Sources: BCA Sekuritas

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Coal Sector | Not Out of Steam Yet

Exhibit 2. Coal Price Benchmark Tracker

Sources: Bloomberg, Argus, BCA Sekuritas

Exhibit 3. ADRO 1H24F Preview

Sources: BCA Sekuritas, Company

muhammad.fariz@bcasekuritas.co.id 3
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Coal Sector | Not Out of Steam Yet

Exhibit 4. ITMG 1H24F Preview

Sources: BCA Sekuritas, Company

muhammad.fariz@bcasekuritas.co.id 4
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Coal Sector | Not Out of Steam Yet

Exhibit 5. PTBA 1H24F Preview

Sources: BCA Sekuritas, Company

muhammad.fariz@bcasekuritas.co.id 5
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Coal Sector | Not Out of Steam Yet

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