Analisa Saham AALI | 17 Oktober 2018

Mirae Asset Sekuritas Indonesia Company Update
Astra Agro Lestari (AALI IJ) - Potential 3Q18F negative earnings surprise by Andy Wibowo Gunawan (andy.wibowo@miraeasset.co.id)

Oct 16, 2018

Astra Agro Lestari (AALI IJ) - Potential 3Q18F negative earnings surprise

We estimate that Astra Agro Lestari’s (AALI) 3Q18F net profit will drop to IDR312.5bn (-27.1% QoQ) on the back of declining trend global CPO price. Thus, we expect AALI’s 9M18 net profit to reach IDR1.1tr and achieve 91.2% and 69.9% of our and consensus’ estimates, respectively. Keeping the same assumptions, we maintain our TP for AALI at IDR12,500. We derived our target price using P/B target at 1.2x, slightly below its five-year average. Our sole short-term downside risk is lower global CPO price.

Better weather in its all oil palm plantation areas
We believe that AALI’s 3Q18F FFB nucleus production will soar up to 1.9mn tonnes (+30.0% QoQ), provided favorable weather condition during the quarter. All of AALI’s oil palm plantations in Sumatra, Kalimantan, and Sulawesi have shown improvements in the number of rainy days. In Sumatra, the 3Q18 number of rainy days dropped to 10.9 days (-24.3% QoQ), followed by those of Kalimantan and Sulawesi that went down to 9.1 days and 10.4 days, respectively (-39.0% and -43.4% QoQ, respectively). Overall, we believe that AALI’s 3Q18F CPO production can rise to 594,800 tonnes (+24.0% QoQ).

Potential 3Q18F negative earnings surprise
In light of higher estimated 3Q18 CPO production, we project AALI’s CPO sales volume to climb to 443,300 tonnes (+22.0% QoQ) in the quarter. Meanwhile, we expect AALI’s 3Q18F CPO price to dwindle to IDR7,404/kg (-8.3% QoQ) on the back of declining trend global CPO price. Thus, we estimate that AALI’s 3Q18F revenue will be relatively flat at IDR4.6tr (+0.4% QoQ). Moreover, we predict that AALI’s 3Q18 net profit will drop to IDR312.5bn (-27.1% QoQ). Hence, we expect that AALI’s 9M18 net profit will reach IDR1.1tr, with run-rates of 91.2% and 69.9% against our and consensus’ targets, respectively. 

With average 15.2 years old, AALI is in declining FFB yield phase 
By 1H18, AALI’s average age of oil palm trees stood at 15.2 years, older than its 1H17 average age of oil palm trees at 14.0 years. This indicates that AALI has already in declining FFB yield phase. We note that the FFB yield for 15.2-year-old oil palm trees was 20.0 tonnes/ha, while for 14.0-year-old trees, the figure was higher at 21.0 tonnes/ha.   

Maintain TP at IDR12,500, but downgrade rating to a Hold call
Keeping the same assumptions, we maintain our TP for AALI at IDR12,500. We used a P/B target at 1.2x to capture AALI’s target price, slightly below its five-year average. We suspect that markets were too optimistic about B20 biodiesel mandate issue, contrary to our less optimistic view on the implementation of B20 biodiesel mandate for public services obligation (PSO) since the gap price between biodiesel and diesel are quite wide. Our sole short-term downside risk is lower global CPO price.