BANPU

BANPU Plc (BANPU)

1Q13’s profit to fall 53%qoq due to decreasing price and sales volume
We estimate 1Q13’s net profit at B710m, decreasing 53%qoq as a result of the
following reasons. 1) Average coal sale prices in Indonesia and Australia are projected
to continue decreasing by 3.6%qoq and 3.1%qoq to stand averagely at US$80/ton and
US$63/ton, respectively, which is in line with global coal price index that has been
declining over the past 3-6 months. 2) Coal sales volume from Indonesian mines is
anticipated to decline by 12.5%qoq to 7 million tons because of a rainy season in
Indonesia. Likewise, coal production and sales volume from Australian mines is
projected to stand low at only 3.3 million tons because of the moving of a longwall of
Mandalong source. Meanwhile, overall cost of the company has remained close to that
of the previous quarter because there is still land leasing fee carried forward from late
2012 that will be booked as an expense in 1Q13 (but in 2Q13 there is projected to see
a decrease in the production cost after a closure of high-cost mines and an
enhancement of production capacity). Consequently, overall gross margin has fallen to
only 32.1% from 34.1% in the prior quarter. However, in 1Q13 there is still a positive
factor to support BANPU’s profit, which is BLCP power plant (BANPU holds 50% stake)
that has resumed its fully utilization rate after a 2-month annual maintenance
shutdown in 4Q12. Overall, net profit in 1Q13 would account for only 9% of our
FY2013’s net profit forecast.
- Cut 2013-2014’s forecast to reflect lower-than-projected margin
We revise down our net profit forecast for FY2013-2014 to reflect the gross margin that
is projected to be lower than previously estimated, from 35% to 33%. As a result, new
2013-2014’s net profit forecast decreases from previously forecasted by 18.5% and
17.0%, respectively. For the outlook in 2013, the profit is anticipated to weaken
significantly from 2012 due mainly to a decrease in the coal sale price. Average coal
sale price in 2013 is projected to drop to only US$80/ton from US$90/ton in 2012,
which is in line with global coal price index. In the past 1-2 months, BJI has been
swinging within a frame of US$80-90/ton, reflecting an oversupply in the coal industry
as a result of decreasing demands following the economic recession, especially in
Europe. However, a recovery is foreseen in 2H13 from the world economic
improvement. Accordingly, 2014’s profit outlook would rebound from 2013. For the
profit in 2Q13, it is projected to escalate from 1Q13 due to the following contributions.
1) Production cost is estimated to decrease to US$46-47/ton from US$49-50/ton as a
result of the above-mentioned cost control. At the same time, average coal sale price is
projected to stabilize at US$80/ton, which would help boost the gross margin. 2) Coal
production and sales volume in Australia is projected to normalize to 4 million tons
because there is not a production halt for moving of longwall of any projects.
- Hold. No supporting factors in next 1-3 months
Under the new forecast, 2013’s fair value (DCF) is B420.86/share (from B492.48). We
reiterate our recommend of only “hold” because no new supporting factor is foreseen in
the next 1-3 months. Although the share price has substantially undergone correction
to reflect negative factors of the industry, as long as the coal price has still not
rebounded like in the past 1-2 months and overall earnings performance in 1H13 of
BANPU is still feeble, the share price would still be pressured in the short term