<Result Analysis> Beating our expectations on strong CPO price

  • 1Q22 earnings reached Rp873bn (+423.6% y-o-y, +34.6% q-o-q) beating our expectations
  • Strong earnings driven by strong CPO selling prices 
  • Maintain BUY with TP of S$1.00

What’s new 

  • 1Q22 earnings beating our and consensus expectations. Bumitama (BAL) 1Q22 earnings reached Rp873bn (+423.6 y-o-y , +34.6% q-o-q) beating our expectation on strong CPO selling prices. 1Q22 earnings accounted 46% of our FY22F earnings forecast of Rp1.9tr (+10.3% y-o-y).
  • Revenue climbed 69% y-o-y to Rp3.8tr (+3.9% q-o-q) despite lower CPO sales volume.  BAL managed to achieve strong top line performance despite -5.2% y-o-y CPO sales volume decline to 238k MT (-2.9% q-o-q) , in line with CPO production decline of -3.7% y-o-y to 261k MT (+13.1% q-o-q) in 1Q22. BAL booked CPO selling prices of around Rp13,600/kg (+76% y-o-y, +0.7% q-o-q), in line with rising CPO price benchmark in 1Q22.
  • Fruits yield recovered q-o-q, but still lower y-o-y.  BAL’s fresh fruits bunches (FFB) production (internal, nucleus + plasma) reached 852k MT (-29.2% y-o-y, -16.3% q-o-q) , and overall CPO production offset by external fruits purchase of 317k MT (+0.7% y-o-y, +6.2% q-o-q). Nucleus FFB yield recovered to 4.7MT/ha in 1Q22 from 4Q21 low at 4.0MT/ha but still lower than 1Q21’s level of 4.9MT/ha. Meanwhile higher external fruits contribution total processed fruits lowered CPO extraction rate slightly to 22.5% vs. 4Q21 and 1Q21 level of 22.6% and 22.8% respectively.

Our view

  • We assume earnings will trend lower from 2Q22 onward.  We assume earnings to trend lower in 2Q22 onward on lower selling prices amid Indonesia CPO export ban. The key upside risk to our forecast is if the CPO selling price sustained at least at 1Q22 level which higher than our FY22F forecast of Rp10,584/kg, despite Indonesia’s temporary CPO export ban in May onward, due to stronger than expected domestic cooking oil demand and biodiesel consumption.
  • Maintain BUY with TP of S$1.00.  Despite share price climbing 35% year to date (YTD), BAL is still trading at FY22F PE of 7.2x , below its five years average PE multiple of 9.4x. Amid the positive y-o-y earnings growth prospects, we believe the share price has room to further perform this year.

Quarterly financial summary 

 1Q224Q213Q212Q211Q21y-o-yq-o-q
 RpbnRpbnRpbnRpbnRpbnChangeChange
Revenue3,899,5503,751,8653,058,5703,131,2562,306,93969.0%3.9%
Gross profit1,500,6221,287,5671,004,254657,693507,141195.9%16.5%
NPATMI873,023648,602588,735317,299166,731423.6%34.6%
GPM (%)38.5%34.3%33%21%22%  
NPATMIM (%)22.4%17.3%19.2%10.1%7.2%  
        
Sales Statistics (MT)       
FFB production (MT)852,4411,018,3941,138,5451,282,8231,203,292-29.2%-16.3%
    Own596,309501,438578,554644,804611,382-2.5%18.9%
    Smallholders256,132218,273255,880286,534276,694-7.4%17.3%
    External317,267298,683304,111351,484315,2170.7%6.2%
CPO production (MT)261,730231,417256,614291,766271,826-3.7%13.1%
PK production (MT)56,01951,31155,11160,95755,6210.7%9.2%

Source : Company, DBS Bank