Bumitama Agri Ltd: FY22 core net profit in line with our estimate
- FY22 core net profit (excluding forex translation losses of Rp300bn) reached Rp3.1tr (+85.5% y-o-y) in line with our estimate
- We forecast earnings of Rp2tr in 2023 (-36% y-o-y) mainly on lower CPO selling price
- Maintain BUY rating with TP of S$1.0
What’s new
- FY22 core net profit (excluding forex translation losses of Rp300bn) reached Rp3.1tr (+85.5% y-o-y) in line with our estimate. Reported net profit reached Rp2.8tr but after adjusting for Rp300bn of forex translation losses, we arrived at Rp3.1tr core net profit in 2022 (+85.5% y-o-y). This accounted for 97% of our FY22F earnings forecast, in-line.
- Selling price rebounded to 8.7% q-o-q to Rp11,300/kg (-16.3% y-o-y) in 4Q22, in line with Indonesia domestic CPO price trend. Revenue reached Rp3.2tr (-12.8% y-o-y, -8.9% q-o-q). BAL’s average selling prices were in line with Indonesia domestic CPO price benchmark trend, since its CPO sales are mainly in the domestic market. Meanwhile CPO sales volume trended 16.4% q-o-q lower to 260k MT (+6.1% y-o-y) in line with the production trend. CPO output trended lower in 4Q22, as seasonal peak crops occurred in 3Q22. CPO production volume reached 264k MT (+14.3% y-o-y, -17.4% q-o-q) in 4Q22, the weaker production pattern revealed seasonal low production after productivity peaked in 3Q22. FY22 CPO production climbed by 13% y-o-y to 1.2m MT due to decent extraction rate of 22.3% as well as Fresh Fruit Bunches yield of 21.4 MT/ha in 2022 (FY21: 18.6 MT/ha).
Our view
- We maintain our FY23F earnings forecast as we keep our Malaysia benchmark and Indonesia domestic CPO price assumptions of US$1,125 per MT and US$850 per MT, respectively. The selling price is expected to trend lower y-o-y and average Rp10,050/kg for BAL, and thus its earnings are to trend lower, to Rp2tn in 2023. Despite lower earnings expected in 2023 in the absence of record-high CPO prices seen in 1H22, the earnings forecast is still much better than 2019-2021 earnings. We believe BAL’s strong CPO productivity outlook will lead to strong profitability despite the lower selling price outlook.
- Maintain BUY with TP of S$1.0. Even with lower palm oil price and earnings assumptions in 2023, we think BAL remains attractive, given its young age profile and strong profitability performance. Amid the trend of declining CPO yields across the Indonesia and Malaysia regions, palm oil companies with strong production performance are likely to outperform its peers, as it could better capitalize on positive palm oil prices trend. We maintain our BUY rating with DCF-based TP of S$1.0, which implies FY23F PE of 10x.
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