PT ASTRA AGRO LESTARI TBK
12 Nov 2020
PT ASTRA AGRO LESTARI TBK
AALI posted strong results in 3Q20 with net profit of IDR 191 billion (vs: 2Q20 net profit of IDR 21 billion). The strong 3Q20 result came largely inline with our expectations due stronger CPO average selling price by +15,2% QoQ, despite lower production and sales volume. For 9M20, AALI posted net profit of IDR 583 billion (+424,1% YoY), achieving 92% our FY20F. We estimate AALI to post stronger result in 4Q20, on the back of: 1). Lower CPO output from Malaysia and Indonesia due to La-nina projection. 2). Demand recovery and 3). Indonesia government to increase biodiesel mandate. We retain our BUY recommendation, TP Rp 12,500/share. AALI is currently trading at 1.18x PBV 2021F.
Above Expectations 3Q20 Results, Thanks to Strong ASP
AALIýs 3Q20 net profit came in at IDR 191 bn (+128% YoY , +824% QoQ) mainly due to, CPO prices rebound in 3Q20 driving average selling price to Rp 8,225/kg (+ 15% QoQ and +33% YoY). However, lower CPO production in 3Q20 oF 327,5k Mt (-22% YoY and -7% QoQ) attributed to the soft CPO sales volume in of 346K (-16% YoY and -14% QoQ). In 9M20 AALIýs net profit jumped to IDR583bn (+424% YoY) achieving 73% and 71% of our and the consensusý FY20F, respectively. Likewise, AALIýs CPO sales volume also declined to 1.10 MT (-14.4% YoY), but can be compensated with higher CPO ASP to IDR8,194/kg (+27.1% YoY). For 4Q20, we foresee better earnings, mainly driven by higher ASP as a result of higher CPO prices. On other hand, AALI is expected to maintain its good margin and efficiency despite the higher estate maintenance requirement for its older trees cluster.
We Expect CPO Prices to Averaging at US$ 2,900/MT (+7,2% YoY) in 2021
We note that CPO price has stabilised at around RM2,600-RM2,700 per MT after recovering from its March slump. Oil world predict global CPO production to remain weak by -4% YoY (-1.1 mn tons) driven by lower output from Indonesia (-4,1%) due to labour shortages and poor fertiliser in some areas. Meanwhile, Malaysiaý production came in at only 1.6 mn tons (-3% YoY). On the demand side, we see that Malaysiaýs October CPO export slightly increased by +4,1% MoM to 1,1 mn tons. In Indonesia, the government to increase the export levy to support B30 mandate. Government is set to achieve its 8m KL biodiesel absorption target this year while the export market is expected to remain steady. We see investors are now focussed on the CPO price outlook for 2021. We forecast that global CPO prices would be strengthening further, given some of positive catalysts. We expect CPO prices to averaging at US$ 2,900/MT (+7,2% YoY) in 2021.
BUY Rating ý Fair Value at Rp 12.500/share
We believe CPO price is quite sustainable through to 2Q21. As we roll forward our valuation to FY21, our TP inches up to Rp12.500. AALIýs share price is trading at 13,6x FY21 PE, still lower than its 3-year historical average of 30x PE. Key risks: 1) Significant drop in CPO global prices; 2) lower than expected CPO sales volume; 3) changes in government policies.