AKR Corporindo (AKRA) - BUY (Maintain) 

Last Price: 1,700, TP: 1,900

Magnificent Year; Another One in 2023?

Ending the year on a high note. AKRA posted a net profit of IDR 840 billion (+167% yoy, +38% qoq) in 4Q22, on the back of strong revenue (IDR 12.9 trillion; +53.2% yoy, +3.9% qoq) and margins growth (EBITDA:+606 bps to 10.2%, NPM: +276 bps to 6.5%). AKRA’s petroleum distribution and chemical trading businesses were the main drivers of its revenue growth, with petroleum distribution posting revenue of IDR 9.9 trillion (+101.4% yoy, +7.1% qoq) and chemical trading generating IDR 1.9 trillion (+71.9% yoy, -8.6% qoq). The surge in oil prices, coupled with increased demand from mining and smelter companies, led to massive revenue growth from petroleum distribution. Supported by satisfactory margins from its trading and distribution business, AKRA managed to post an EBITDA of IDR 1.3 trillion (+280.5% yoy, +62.4% qoq) in FY22. On its bottom line, AKRA posted a net profit of IDR 2.4 trillion, resembling an EPS growth of +116.2% yoy, while beating our estimates and consensus’ (SSI 119%, cons xx%).

What’s in store for 2023? We expect AKRA to maintain its growth momentum, supported by its industrial estate business and improved margins from the trading & distribution business. We project JIIPE to book land sales of 70 ha this year, primarily to smelter and mining companies (both domestic and overseas ones), due to the ease of doing business in Indonesia and government support. However, we project AKRA to book a lower petroleum distribution ASP in 2023, which might lead to a decline in its trading and distribution revenue. Nevertheless, we foresee AKRA’s margins to stay robust, with a projected GPM of 12% and a projected EBITDA margin of 10%. Also, AKRA targets to open 50 new retail gas stations (in partnership with BP) this year, which might contribute to its bottom line.

2023 outlook. Considering AKRA’s plans for this year and beyond, we revised our FY23F EBITDA and net profit projections for AKRA to IDR 3.8 trillion (+9% yoy) and IDR 2.7 trillion, respectively, resembling an EPS growth of +14.3%. We also expect positive growth in its GPM (+160 bps) and EBITDA margin (+100 bps), owing primarily to better efficiency. Lastly, we expect AKRA to be able to maintain its DPR at 57.6% and its net gearing at a relatively low level (FY22: -0.1x), keeping its status as a net cash company.

BUY, TP of IDR 1,900. We reiterate our BUY rating on AKRA with a higher TP of IDR 1,900, implying an FY23F P/E of 12.2x. We are confident that AKRA will maintain its growth momentum and stay resilient in the face of current macroeconomic headwinds.

Downside risks: Lower-than-expected distribution volume, lower-than expected land sales