<Result Analysis> Beating expectations on strong CPO selling prices
- Earnings jumped 52.8% y-o-y to Rp1.7tr , beating our expectation
- Strong earnings momentum to sustain in 2022 amid firm Indonesia’s domestic CPO price trend
- We currently have a BUY rating with TP of S$0.75
What’s new
- FY21 earnings beating our expectation. BAL posted FY21 earnings and topline of Rp1.7tr (+52.8% y-o-y) and Rp12.2tr (+34.6% y-o-y) respectively, beating our expectations. Strong Palm oil selling prices of Rp13,500/kg (+56% y-o-y, +26.2% q-o-q) supported earnings performance amid production downtrend , and sent the 4Q21’s earnings to Rp648bn (+31.2% y-o-y, +10.2% q-o-q). BAL managed to secure strong performance last year despite it caught by unfavorable CPO hedges in 1H21.
- BAL’s posted weaker fruits harvest in 4Q21. BAL posted total processed fruits of 1.0m MT (-26% y-o-y, -10.6% q-o-q) in 4Q21 , as both nucleus and smallholders fruits production reached 501k MT (-29.6% y-o-y, -13.3% q-o-q) and 218k MT (-32% y-o-y, -14.7% q-o-q) respectively. Meanwhile, fruits purchased from external farmers did not provide sufficient supplies alternative due to pro longed rain season. External fruits purchases reached only 298k MT (-12% y-o-y, -1.8% q-o-q) in 4Q21.
- Firm CPO extraction rate supported margin performance, too. 4Q21’sPalm Oil and Kernel production volume reached 231k MT (-25.2% y-o-y, -9.8% q-o-q) and 51.3k MT (-21.5% y-o-y , -6.9% q-o-q) respectively. The pattern tracked the fruits production trend mentioned above however, BAL successfully kept the CPO extraction rate above 22.5% in 4Q21 thus, kept overall milling cost per MT low.
Our view
- We have a BUY rating with TP of S$0.75. We are reviewing our earnings forecast amid current strong CPO price trend. It seems like BAL could sustain its strong earnings momentum amid current decent CPO price trend. Indonesia’s domestic CPO price traded around Rp14,500/kg in Jan-Feb 2022 , higher than 4Q21’s price around Rp13,700/kg level. Meanwhile, BAL is unimpacted by Indonesia’s latest domestic market obligation (DMO) regulation which targets only CPO exporters.
Quarterly financial and operational performance summary
| 4Q21 | 3Q21 | 2Q21 | 1Q21 | 4Q20 | y-o-y | q-o-q | FY21 | FY20 | |
| Rpbn | Rpbn | Rpbn | Rpbn | Rpbn | Change | Change | Rpbn | Rpbn | |
| Revenue | 3,751,865 | 3,058,570 | 3,131,256 | 2,306,939 | 3,022,086 | 24.1% | 22.7% | 12,248,630 | 9,101,746 |
| Gross profit | 1,287,567 | 1,004,254 | 657,693 | 507,141 | 987,347 | 30.4% | 28.2% | 3,456,655 | 2,526,147 |
| NPATMI | 648,602 | 588,735 | 317,299 | 166,731 | 494,258 | 31.2% | 10.2% | 1,721,367 | 1,126,393 |
| GPM (%) | 34.3% | 33% | 21% | 22% | 33% | 28.2% | 27.8% | ||
| NPATMIM (%) | 17.3% | 19.2% | 10.1% | 7.2% | 16% | 14.1% | 12.4% | ||
| Sales Statistics (MT) | |||||||||
| FFB production (MT) | 1,018,394 | 1,138,545 | 1,282,823 | 1,203,292 | 1,371,907 | -25.8% | -10.6% | 4,643,054 | 4,534,072 |
| Own | 501,438 | 578,554 | 644,804 | 611,382 | 711,771 | -29.6% | -13.3% | 2,336,178 | 2,270,745 |
| Smallholders | 218,273 | 255,880 | 286,534 | 276,694 | 320,818 | -32.0% | -14.7% | 1,037,381 | 1,043,383 |
| External | 298,683 | 304,111 | 351,484 | 315,217 | 339,318 | -12.0% | -1.8% | 1,269,495 | 1,219,944 |
| CPO production (MT) | 231,417 | 256,614 | 291,766 | 271,826 | 309,435 | -25.2% | -9.8% | 1,051,623 | 1,024,548 |
| PK production (MT) | 51,311 | 55,111 | 60,957 | 55,621 | 65,372 | -21.5% | -6.9% | 223,000 | 215,691 |
| CPO sales volume | 245,000 | n.a | n.a | n.a | 312,505.0 | 1,081,000 | 982,578 | ||
| PK Sales volume | 52,000 | n.a | n.a | n.a | 65,552.0 | 226,000 | 209,804 | ||
| CPO ASP (Rp/kg) | 13,500 | 10,000 | 8,600 | n.a | 8,655 | 56.0% | 26.2% | 9,900 | 8,334 |
| PK ASP (RP/kg) | 7,100 | n.a | n.a | n.a | 4,400 | 61.4% | 7,100 | 4,351 |
Source : Company, DBS Bank