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Emiten Report

18 September 2023

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BRPT: BUY (Maintain), TP at IDR 1,590 – Unlocking the Value of Renewables

Barito Renewables Energy Tbk (BREN), BRPT’s subsidiary in the geothermal sector, will soon carry out its IPO with an offering price range of IDR 670-780/share, implying potential IPO proceeds of up to IDR 3.51 trillion. The IPO proceeds will be used to support BREN's expansion; the company  aims to have a total installed geothermal capacity of 1,000 MW by the end of 2023F (current: 885 MW). We believe BREN’s IPO will be a positive sentiment for BRPT; therefore, we decided to assign a BUY rating on BRPT with a TP of IDR 1,590/share.

Brief introduction on Indonesia’s largest geothermal operator. Barito Renewables Energy (BREN) is a subsidiary of BRPT (66.67%) focusing on the geothermal sector. BREN currently operates 3 Geothermal Working Areas  (Salak, Wayang Windu, and Darajat), producing steam and electricity with a total capacity of 885 MW (38% of Indonesia's geothermal capacity), making it Indonesia's largest geothermal operator and the world's fourth largest, with a solid availability factor (1H23: >90%). The steam and electricity produced by BREN’s facilities are sold to PLN with a take-or-pay system and ASPs of USD 6-7 cents/kWh (steam) and USD 9-10 cents/kWh (electricity). Supported by its large capacity, BREN’s financial performance is relatively stable, and the company currently holds several long-term sales contracts. Going forward, BREN will add Binary technology to its Salak GWA, which will bring an additional capacity of 15 MW, and increase the capacity of its other GWAs (Wayang Windu Unit 3 and Salak Unit 7). In addition, BREN is also exploring the possibility of opening 2 new GWAs in North Maluku and Lampung.

Better numbers from the petrochemical business. Another factor that convinces us regarding BRPT's future prospects is the improvements in its petrochemical business’ performance, supported by better polyolefin price spread, which also boosted its contribution to the company's EBITDA to 27% in 1H23 (FY22: 5%). The satisfactory run rate (>75%), Chandra Asri Petrochemical’s (CAP; BRPT’s petrochemical subsidiary) position as the market leader in the Indonesian petrochemical industry, as well as global economic recovery (especially China) are several factors projected to support BRPT’s petrochemical business. Also, BRPT will establish new chemical business lines by building a caustic soda factory (capacity: 400 Kton/year) and an ethylene dichloride (EDC) factory (capacity: 500 Kton/year), as well as CAP’s second factory, which will double its production capacity.

BUY, TP IDR 1,590 (31.4x FY24F EV/EBITDA). BRPT's decision to unlock the value of the renewable energy sector and the company's expansion efforts prompted us to assign a BUY rating on BRPT with a TP of IDR 1,590/share, reflecting 31.4x FY24F EV/EBITDA. Risks: fluctuations in petrochemical products’ selling prices and geothermal energy production, regulatory changes.

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