ITMG’s revenue went up +3.6% yoy in 6M21 to USD 676.3 million, with better profitability margins; the company’s GPM was recorded at 33.6% (6M20: 14.4%); OPM at 26.7% (6M20: 5.8%) and NPM at 17.4% (6M20: 4.6%). ITMG recorded significant earnings growth in 6M21 to USD 117.6 million (+293.7% yoy). SSI estimated that ITMG’s earnings growth would continue in 2H21, driven by the upward trend of global coal prices. We maintain BUY recommendation for ITMG with TP at IDR 19,700, reflecting 2.1x FY21F EV/EBITDA.
Earnings growth of +421.8% yoy/+79.5% qoq in 2Q21. ITMG’s coal sales volume fell by -7.5% yoy in 2Q21 to 4.9 million tons, mainly due to higher rainfall. However, the figure is +19.5% higher than the one recorded in the previous quarter. The significant jump in ASP to USD 80.3/ton (2Q20: USD 52.5/ton, 1Q21: USD 68.1/ton) boosted ITMG’s topline in 2Q21 to USD 392.1 million (+36.7% yoy/+37.9% qoq). In addition, ITMG managed to record better profitability margins; its GPM was recorded at 36.3% (2Q20: 10.2%; 1Q21: 29.9%); OPM at 29.8% (2Q20: 1.1 &: 1Q21: 22.4%) and NPM at 19.3% (2Q20: 5%; 1Q21: 14.8%).
Projected production volume growth of +10% yoy for FY22F. ITMG’s coal sales volume in 6M21 was recorded at 9 million tons, representing 45.1% of SSI’s projection for ITMG’s production volume in FY21F (19.5 million tons). SSI estimated that ITMG’s productivity might grow even higher in 2H21, along with lower rainfall. SSI projected that ITMG’s production would reach 19.9-21.9 million tons in FY21F-FY22F (FY20: 18.6 million tons).
Even better earnings in 2H21. ITMG managed to enhance its production efficiency in 2Q21, as reflected by its SR (stripping ratio) which dropped to 10.5x (2Q20: 10.8x; 1Q21: 11.5x). Better weather conditions and better efficiency are expected to help ITMG record an even better performance in 2H21. High demand from China, as well as limited global supply, are expected to keep the upward trend of global coal prices this year, which will certainly have a positive impact on ITMG’s earnings.
Maintain BUY, TP at IDR 19,700. Our TP reflects FY21-22F EV/EBITDA of 2.1-2.0x, with an upside potential of +26.1%. At present, ITMG is trading at -1SD of its 5-year P/E band. Downside risk: 1) lower production figures than expected; 2) lower global coal prices; 3) worse-than-expected efficiency.