We view UNTR’s move up into higher multiple range of 12 times FY10 earnings is appropriate given current condition of the stock market and the company’s fundamental. UNTR 1Q09 results came in higher compared to consensus and our estimates, with revenue at Rp6.97tr (+20%, YoY), and net profit of Rp0.812tr (+58%, YoY). We set a target price of Rp11.434, implying a trading multiple of 12 times FY10 earnings. We maintain our BUY recommendation
UNTR recorded consolidated 1Q09 net revenue of Rp6.97 trillion (+20%, YoY), with net profit of Rp812bn (+58%, YoY). Mining Contracting contributed 47%, while Construction Machinery contributed 40%, and the rest by Mining division. Higher ASP, weakening Rupiah, and stable cost in each of the three division led to gross profit growth of 61% YoY at Rp1.65 trillion and to operating profit growth of 71% YoY to Rp1.33 trillion. These profits have resulted in profitability margins that are significantly higher compared to the same period last year and to our estimates.
In 1Q09 UNTR, revenues from Construction Machineries came in at Rp2,77 trillion. Higher composition of mining sector machineries in 1Q09 , and weakening Rupiah currency to US$ propelled quarterly gross margin to 29% in 2009 as compared to gross margin in 1Q08(21%) andannual average in 2008 (21%). Machineries in the mining sectors are usually heavier than other machineries and commanded higher selling price: excavator and dump truck is priced at around US$2mn as compared to other equipments priced at 0.4-0.7mn US$. Higher composition in the mining sector will result in higher average gross margins.
Until March 2009, PT Pamapersada Nusantara (Pama) delivered 14,5 mn tons of coal, or 2% higher than last year’s production, with overburden removal of 121.05 million bcm or an increased of 22%. The higher production combined with the weakening Rupiah has resulted in a 47% YoY jumped of revenues from Rp2.2tr in 1Q08 to Rp3.3tr in 1Q09, to yield a higher gross margin of 22% in 1Q09 v.18% in 1Q08.
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