UNTR BUY UPGRADE TP 48600 (from 46700)
Buy with higher TP
UNTR is a beneficiary of not only strong coal prices, but also IDR weakness and hence we saw good 3Q18 earnings. We maintain our BUY call as we expect strong earnings momentum to persist for the next 12 months. We raise our TP by 4% to IDR48,600 due to higher earnings forecasts. The stock trades at undemanding 9.3x FY19E P/E, 31% lower than its 10-year mean of 13.5x
Better-than expected results
UNTR posted strong 3Q18 earnings of IDR3,593b, +21.9% QoQ and +62.2% YoY. 9M18 earnings at IDR9,072b were up 60.9% YoY and significantly beat our and consensus’ estimates. The strong 3Q18 earnings were driven by both construction machinery and contract mining divisions on the back of higher ASP, strong coal prices, weaker IDR and margin expansion. Contribution from the mining division declined QoQ due to a 23.0% QoQ volume drop which offset the 0.4% QoQ ASP increase and IDR depreciation. The strong 3Q18 performance improved net margin to 16.2% from 14.8% in 2Q18.
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