1H22: Results Above Expectations
• Results above expectations. Bumitama Agri (BAL) reported a core net profit of Rp2,304b (+>100% hoh & yoy) for 1H22, accounting for about 90% of our full-year assumption. This is above our and consensus expectations due to better-than-expected sales volume. 1H22 earnings were mainly buoyed by strong selling prices which averaged Rp14,327/kg, 75% higher than 1H21 despite lower sales volume.
• Outperformed its peers with higher 2Q22 qoq earnings. 2Q22 net profit increased by 50% qoq, mainly supported by strong sales volume (+24% qoq) and the strong production recovery in 2Q22. As compared to most of its Indonesia peers whose sales volumes were affected by the export limitation in 2Q22, BAL’s sales were not affected as it only sells to the domestic market. In addition, BAL was still able to deliver CPO to its customers in 2Q22, thanks to its long-term relationship with customers as well as its customers’ larger storage capacity.
• Strong production recovery in 2Q22. The total FFB production is still within our expectation, contributing 50% of our full-year forecast. 2Q22 production came in strongly with both FFB and CPO production increasing by ~30% qoq. The strong production recovery in 2Q22 had resulted in a superior quarterly achievement of 6.1tonne/ha, supported by favourable weather during the year, as well as a number of field continuous improvement initiatives, such as water management, mechanisation, bio-fertiliser application and the Accelerated Production Taskforce.
• We expect 2H22 earnings to be lower due to lower CPO ASP, as domestic CPO prices have dropped by about 20% since Jun 22 due to the high inventory in Indonesia. We expect sales volume in 2H22 to be higher, but this would be partially offset by the lower CPO ASP and hence resultant lower margin.
• Maintain earnings forecasts. We maintain our net profit forecasts for 2022-24 at Rp2.49t, Rp2.02t and Rp2.14t respectively, as we await the upcoming briefing on the morning of 15 Aug 22.
• Maintain HOLD with target price of S$0.65. We peg our valuation to 6x 2022F PE.
• BAL has declared an interim dividend of S$0.0125/share, which translates into a dividend yield of 1.9% (1H21: S$0.0045). The dividend will be payable on 16 Sep 22.