Stellar 1Q25 YoY performance backed by strong CPO price performance. In 1Q25, NSSS delivered net earnings of IDR 162bn (-4.2% QoQ, +2,724.8% YoY), surpassing our forecast by a wide margin (48.0% of FY25F previous estimate). The results were driven by strong top line of IDR 476bn (-11.0% QoQ, +71.4% YoY), supported by solid CPO sales of IDR 414bn (-13.0% QoQ, +64.5% YoY), with ASP rising to IDR 14,284/kg (+8.2% QoQ, +24.8% YoY) and sales volumes increasing to 29,007 tons (-1.7% QoQ, +31.8% YoY). Nucleus FFB production surged to 121,969 tons (-14.7% QoQ, +20.2% YoY), with yield at 4.7 tons/ha (4Q24: 5.5 tons/ha; 1Q24: 3.9 tons/ha) helped by improved weather condition in Central Kalimantan. Mill performance was equally impressive, with OER rising to 22.3% (4Q24: 21.0%; 1Q24: 21.6%), boosting CPO production to 28,094 tons (-10.1% QoQ, +26.1% YoY). On the cost front, gross profit reached IDR 247bn (-11.0% QoQ, +277.0% YoY), with relatively low COGS of IDR 230bn due to lower fertilizer cost on declining biochemical prices.

 

A fruitful year, although some moderation in upcoming quarters are expected. As we head into 2Q25 and beyond, we expect NSSS to maintain its positive earnings trajectory, driven by robust FFB production of 541.4 ktons, supported by higher FFB yield of 20.1 tons/ha. The growth is attributable to the expanding proportion of mature nucleus areas, especially plantations in their 11^th to 15^th year, when yields typically peak, which now comprise 67.9% of the company’s plantation profile (2024: 62.3%). This positions NSSS to achieve relatively high FFB yields of 22–30 tons/ha annually. Furthermore, we expect OER to reach 21.2%, resulting in 2025 CPO production of 119.7 ktons. Supported by strong CPO reference price of IDR 14,000/kg+ in 1Q25 — though some normalization is expected in 2H25 — thus, we conservatively raise our 2025F revenue forecast to IDR 1.77tn (from IDR 1.68tn, +19.3% YoY), with 89.5% of revenue driven by CPO sales. We also expect margins to improve due to lower fertilizer costs, as we anticipate continued fall in biochemical prices throughout the year. Hence, we raise our EBITDA forecast to IDR 781bn (from IDR 642bn, +36.3% YoY) and net earnings to IDR 443bn (from IDR 337bn, +45.3% YoY).

 

Most attractive with lowest PEG in the sector; 48% upside to our IDR 420 TP. Following stellar 1Q25 results, we raise our TP to IDR 420/share (from IDR 350/share), implying +48% upside from current levels. In terms of valuation, NSSS is the most attractive in the sector based on 2025F PEG of 0.3x (70% discount) on the back of robust EPS growth of more than 45%. Thus, we believe NSSS' premium PE to the sector is justified by its relatively young plantation profile, offering significant room for growth and potential dividend distribution in the near term. Additionally, we retain our bullish view on NSSS due to CPO’s defensive nature coupled with well-supported price environment driven by current soybean oil global supply shortage concerns. Risks: underwhelming B40 program on low oil prices and adverse government policy.