Bukit Asam Volume fall short of expectation

PTBA reported its FY11 profit of IDR3trn, a 54% y-o-y increase but fell short of our estimates and consensus. Lower than expected sales volume and significant jump in production cost were the key reason. We lowered our production forecast for 2012 and 2013 by 10% and 9% each respectively thus revising down our target price to IDR21,200 and change our recommendation to Neutral.

Coal production of 12.95m tonnes were below expectation
PTBA’s coal production volume only grew modestly by 4% y-o-y to 12.95m tonnes while we are expecting a full year production of 14m tonnes. Third party purchases of 0.8m tonnes in 2011 also lower than our estimates. Overall, PTBA’s coal sales volume grew by 4% y-o-y and 9% q-o-q at 13.5m tonnes.

ASP increase helps elevate revenue amid acceleration in cost
Blended ASP for 2011 grew by 29% y-o-y but was flat on q-o-q basis. As a result, revenue was upped by 34% y-o-y to IDR10.5trn. Adding to that is the stubbornness of production cost, which experiencing a 13% q-o-q and 25% y-o-y increase that largely driven by coal railway and mining services expenses. Thus gross profit was flat on q-o-q basis despite a 45% y-o-y increase.

Infrastructure expansion to commence in 2012 onward
PTBA’s management indicated that the company will allocate a total of IDR1.4trn for capital expenditure in 2012 in which around IDR560bn will be used to develop port capacity. Expansion projects that were on the pipeline includes several power plants development (for internal and external use), port capacity enhancement and improvement of railway capacity.

Lower earnings estimates resulted a revision on TP and recommendation
As we lowered production volume estimates and increase production cost for 2012-2013 period, we reduced our earnings estimate by 10% for 2012f and 9% for 2013f. As a result, we also lowered our TP to IDR21,200 and downgraded our recommendation to NEUTRAL. Currently traded at 13.8x FY12f PE, the counter is already traded at premium compared to its peers. At the moment, the overall coal sector is lacking any positive catalyst given recently rising oil price will impacted production cost while the coal price remains flat.