1H22 earnings surpassed our FY22 earnings estimate

• 1H22 NPATMI reached Rp2.2tr (+350.1% y-o-y) surpassed our FY22F earnings forecast of Rp1.9tr (10.3% y-o-y) 
• Strong production volume supported earnings performance on top of good palm oil selling price achievement in 2Q22 
• Maintain BUY with S$1.0 target price 

What’s new 

• 1H22 earnings surpassed our FY22F earnings forecast. Bumitama (BAL) posted Rp2.2tr earnings in (+350.3% y-o-y) in 1H22. First semester earnings surpassed our FY22 earnings forecast of Rp1.9tr (+10.9% y-o-y). Meanwhile BAL’s 2Q22 earnings expanded by +311.5% y-o-y to Rp1.3tr (+49.6% y-o-y) jumped from low base last year on higher CPO selling price and CPO output expansion. 
• Indonesia export ban didn’t affect BAL earnings performance. CPO sales volume reached 293k MT (-7.6% y-o-y, +23.1% q-o-q) and selling price touched Rp14,900/kg. Indonesia palm oil Domestic Market Obligation (DMO) and export ban seems did not impact BAL as it sells CPO to domestic market. 
• Double digit palm oil production expansion. 2Q22 CPO production volume reached 341k MT (+17% y-o-y, +30.4% q-o-q). BAL’s CPO production performance was driven by higher processed fresh fruit bunches of 1.53m MT (+19.6% y-o-y, +31.1% q-o-q) and steady extraction rate of 22.3% in 2Q22. 

Our view

• BAL will continue to perform well in 2H22 despite lower selling price vs. 1H22.  BAL will continue perform well in 2H22 despite the lower palm oil selling price vs. 1H22, since BAL’s production uptrend will sustain in 2H22. We have room to raise our earnings forecast as 1H22 earnings already surpassed our FY22 earnings. 
• Maintain BUY with TP of S$1.0.  We like BAL’s young, prime age cycle palm oil estates which help BAL to perform well as seen in 1H22 earnings performance. BAL is trading at FY22F PE of 6.4x, 50% below its five years average PE multiple of 12.9x.