ITMG posted a net profit of USD 99mn (-20.4% QoQ; -77.2% YoY) in 3Q23, which brought its cumulative 9M23 net profit to USD 406mn (-54.6% YoY), in line with our estimate but lower than the consensus (73.4% and 65.1%, respectively). We noticed that the lower effective tax rate of 21% (2Q23: 23%) and gain on coal and fuel swaps in 3Q23 acted as some kind of buffer, preventing a more severe decline in earnings. For now, we keep our forecast unchanged, as we are still waiting for more details from the company’s analyst meeting that will be held soon. Hence, we reiterate our HOLD rating with a TP of IDR 26,000, implying 5.8x FY24F P/E. Our TP is DCF-based, with an assumed CoE of 13.8%. Risks: 1) lower-than-expected global coal prices, 2) regulatory changes.

In line earnings. ITMG’s revenue fell -14.0% QoQ in 3Q23, bringing its cumulative 9M23 revenue to USD 1.8bn (-30.2% YoY), in line with our estimate but below the consensus (75.7% and 69.9%, respectively). The QoQ decline in 3Q23 was mainly caused by the drop in coal prices (to USD 98.7/ton; -13.0% QoQ) and sales volume (to 5.3mn tons; -1.9% QoQ). On its bottom line, ITMG posted a net profit of USD 99mn (-20.4% QoQ; -77.2% YoY) in 3Q23, which brought its cumulative 9M23 net profit to USD 406mn (-54.6% YoY), in line with our estimate but lower than the consensus (73.4% and 65.1%, respectively). We noticed that the lower effective tax rate of 21% (2Q23: 23%) and gain on coal and fuel swaps in 3Q23 acted as some kind of buffer, preventing a more severe decline in earnings.

Production remains robust. ITMG’s coal production volume grew to 5.3mn tons (+20.5% QoQ) in 3Q23, higher than the company’s guidance of 4.8mn tons. The growth was mainly driven by the increase in production from the Trubaindo and Bharinto mines, reaching 1.0mn tons (+42.9% QoQ) and 2.3mn tons (+27.8% QoQ). Meanwhile, the company’s stripping ratio declined to 11.7x (2Q23:12.5x) in 3Q23.

More decline in earnings in 4Q23. As of November 12, 2023, global coal prices had dropped by -8.5% QoQ; assuming ITMG’s sales volume target remains unchanged at 20mn tons, we expect ITMG to book even lower earnings in 4Q23. For now, we keep our forecast unchanged, as we are still waiting for more details from the company’s analyst meeting that will be held on November 15, 2023.

HOLD with a TP of IDR 26,000. We reiterate our HOLD rating with a TP of IDR 26,000, 5.8x FY24F P/E. Our TP is DCF-based, with an assumed CoE of 13.8%. Risks: 1) lower-than-expected global coal prices, 2) regulatory changes.