%20Siapkan%20Tiga%20Lini%20Bisnis%20Baru.jpg "Adaro (ADRO) Siapkan Tiga Lini Bisnis Baru") |
| Adaro (ADRO) Siapkan Tiga Lini Bisnis Baru |
PT Adaro Energy Indonesia Tbk (ADRO) plans to prepare a number of new businesses, in line with the demands of the energy transition at the global and domestic levels.
Chief Financial Officer Lie Luckman said the company plans to develop wind power plants, hydro or hydro power plants, as well as solar-based power plants.
"Now we are preparing new businesses, so that when (coal reserves) are decreasing, we have new businesses to maintain EBITDA and financial performance forward," said Luckman in Jakarta, recently.
He explained that it is possible that coal reserves in Adaro's concession area will decrease even though the current reserves are still quite large. With an average coal production by Adaro of around 50-60 million tons per year and if the concession is extended twice in the next ten years, coal reserves are expected to level off and then decline.
“While we have the next 10 years, we can build wind , diesel, and hydro. To build hydropower it takes about 7-8 years, while others may be faster. So that's our strategy," said Luckman.
Explained in more detail, Adaro's management plans to make a transformation from the coal business to a business that has a more future, divided into three business lines. First, make a business from energy produced by coal to renewable energy, namely in the form of wind, solar, and water power plants.
Luckman said, Adaro has a large area in North Kalimantan of around 14,000 hectares to develop the power plant. He believes that all the clean energy needed is available there and the company has a commitment to develop in that area.
Second, Adaro will gradually move towards the mineral mining business from the previous focus on coal mining. It is known that currently ADRO through PT Adaro Aluminum Indonesia is building an environmentally friendly aluminum smelter at the Green Industrial Park Indonesia, North Kalimantan.
The third is the business line in the battery industry, electric cars, and other industries which are downstream from the previous two business lines, namely energy and minerals. Luckman also believes that all of these new business lines can make Adaro and Indonesia enter into a better world competition.
"We know the President's commitment, Indonesia also has a lot of potential in the mineral sector. We have vast land potential and water potential. Actually, it is a gift that we can really take advantage of, rather than producing all the mining products and selling them abroad," he said.
Luckman admits that in the current financial sector, it is not easy to find funding for the coal mining business. Considering that the domestic and global economic outlook has committed to the net zero emission , so that the company is also aiming to do so.
“It opened our eyes. We are forced to look ahead, where the world trend is. We are aware of that. Initially, we saw it as a threat that our business is a coal commodity business which is very thick with ESG issues. Then we try to see the opportunities in the future," he continued.
Luckman admits that the portion of Adaro's business revenue is still dominated by thermal coal. But little by little, the company is switching to coking coal. Coking coal is not coal that is used to produce energy, but coal that is used as raw material to make steel.
The company believes that the metallurgical coal business will be prospective because until now there has been no substitute for steel making. So as long as the world economy is still running and infrastructure development continues, Luckman believes that much steel is still needed. Meanwhile, currently there are not many countries that can produce steel, including only Mongolia, Canada, America, Australia, and Indonesia.
Stock Recommendation
Meanwhile, RHB Sekuritas recommends trading buy ADRO shares at a target price of Rp 3,400 from the previous Rp 1,900 with a upside 30% This projection is in line with Adaro Energy's performance throughout 2021 which exceeded expectations. During that period, the company managed to record a 58 percent increase in revenue to US$ 3.99 billion, compared to US$ 2.53 billion in 2020.
"The high price of coal commodities has increased the company's margin with NPM during 2021 by 23 percent compared to 2020, which is 6%," explained RHB Sekuritas in his research.
The current increase in coal prices is in line with concerns about fuel supply constraints due to geopolitical tensions. This is expected to be the main catalyst for 2022.
RHB Sekuritas estimates that the price of Newcastle coal during 2022 will remain high above US$ 200 per tonne compared to last year's projection of US$ 136 per ton. Even so, the possibility of price declines could still occur from the return to normal demand in the second and third quarters.
Several other factors, such as a sudden supply recovery, drier weather support in Indonesia and Australia, will potentially reduce production. In addition, the easing of tensions between the two parties (Russia vs. Ukraine) which are currently at odds or the faster adaptation of the use of renewable energy, could be one of the factors that suppress the increase in coal prices.
Thus, RHB Sekuritas projects that this year Adaro Energy will be able to record another new revenue record with a net profit surge of 18 percent, in line with the potential for the average selling price to increase by 11 percent or US$ 82.5 per tonne.
The increase in net profit will mostly be supported by export sales, plus ADRO's target to increase production volume to 58 million tons, an increase of 10% on an annual basis. Operational costs will also increase but with the current good prospects for the coal business, ADRO is still able to maintain a hefty margin with NPM 2022 at 22% compared to the last 10 year average of 11%.
Likewise with the share price of ADRO. RHB Sekuritas believes that the strong sentiment on coal will be the main driver of the stock's performance with a potential increase of 16%. The increase in stock prices is even projected to be higher than the performance of the company and could be a potential downside in the midst of high volatility in commodity prices.
Therefore, this year, RHB has set a target price for ADRO's shares at Rp 3,400 from the target of 7.9 times P/E for the period from 2022 to 2023. Currently ADRO is trading at a P/E ratio of 5.5 times which represents a 30% upside potential.
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