CIMB Indo Tambangraya Megah Result note - Stronger production

(ITMG IJ / ITMG.JK, OUTPERFORM - Maintained, Rp36,450 - Tgt. Rp43,700, Basic Resources)

Maintain Outperform on ITMG. 1Q10 net profit met consensus and our expectations, forming 22% of our FY10 forecast, in line with historical 1Q contributions. ASP is on an uptrend, and 2H10 should be stronger than 1H10. Production was strong, up 47% yoy, despite seasonal weakness. We believe its FY10 production target of 23m tonnes is easily within reach, with potential upside in fact. Given higher (and still rising) production capacity, we raise our FY10-12 production assumptions by 4-21% to 24m-30m tonnes, now expecting output to grow by 12% CAGR over FY10-12 (instead of peaking and staying stagnant at 25m tonnes in FY11-12). Our FY10-12 EPS estimates accordingly rise by 1.5-13% and our DCF-based target price, to Rp43,700 from Rp37,000 (WACC 11%). We see stock catalysts from further sets of strong results and potential M&As.