Menu
Price: IDR 555 - Target Price: IDR 750
Strong Results, Better Outlook
CPO production rose +3.4% yoy in 3Q23. TAPG's nucleus FFB production reached 856k tons in 3Q23, relatively stable when compared to 3Q22 but higher than the previous quarter (+9.9% QoQ); not surprising, considering the fact that FFB production in 2H is usually higher than in 1H. The increase in FFB production led to higher CPO production (+3.4% yoy, +12.0% qoq to 275k tons). Regarding the cumulative figure, TAPG’s nucleus FFB production came in at 2,254k tons in 9M23 (-8.0% yoy), in line with SSI’s target, with an FFB yield of 17.3 tons/ha (vs. 18.7 tons/ha in 9M22). Its CPO production also fell -5.4% yoy to 759k tons with an OER of 23.1%.
3Q23 performance: Net profit growth of +13.7% yoy. TAPG's net profit went up +13.7% (+261.8% qoq) in 3Q23, supported by the increase in its CPO sales volume (+3.2% yoy, +27.5% qoq) and better ASP (+5.4% yoy, -1.0% qoq), On the other hand, its expenses went up as well, especially fertilizer expense, which rose +123.7% yoy (-21.3% qoq) and led to a spike in COGS of +17.8% yoy (+0.9% qoq). Cumulatively, TAPG booked revenue of IDR 6.0 trillion in 9M23 (-10.5% yoy) (slightly below SSI’s and consensus estimates); the YoY decline was mainly caused by the drop in TAPG’s CPO ASP of -11.0% yoy, even though its sales volume rose +7.0% yoy. Its COGS rose +14.2%, mainly due to the surge in fertilizer expense (+87.2% yoy), putting pressure on its net profit (-52.8% yoy to IDR 1.1 trillion).
Vertical expansion with the new PKO factory. TAPG’s kernel oil factory, with a total processing capacity of 300 tons/day, commenced production activities in 3Q23. The factory will enable TAPG to sell value-added products from PK, such as CPKO and Palm Kernel Meal (PKM). In 3Q23, CPKO and PKM products only contributed 0.6% of TAPG’s total revenue; however, we estimate that in FY24F, PKO will contribute 5-10% of the company's total revenue.
Better FY24F outlook, BUY with a TP IDR 750/share. We project TAPG's CPO production to grow ~+3% yoy, supported by its FFB production growth (+2% yoy) with an average plant age of 13 years, and the fact that 78% of TAPG’s plants are in their prime age. Pressure on ASP is also expected to ease down, and we expect TAPG’s CPO ASP to increase ~+7% yoy to IDR 11-12K/kg, mainly due to the El-Nino and global economy recovery. Also, fertilizer expense might drop -25% yoy in FY24F, which should help boost TAPG's bottom line (projection: +35.4% yoy). Therefore, we maintain our BUY rating on TAPG (TP: IDR 750, implying an FY23F EV of USD 8,680/ha). Main risk: Lower-than-expected CPO selling prices.
Samuel Sekuritas Indonesia is a leading Indonesian securities brokerage firm. Established in 1997, the firm has grown to become one of the most respected and trusted financial services companies in the country. With a wide range of services and products, Samuel Sekuritas Indonesia has become a trusted partner to many investors, both institutional and individual.
The company offers a variety of financial services, including equity, debt and derivative securities brokerage services, research and portfolio management, asset management and capital market services, as well as a range of other investment solutions. Samuel Sekuritas Indonesia is also a leader in providing financial education and training, and has established itself as a leading provider of investor relations services.
The company has a strong research capability and is committed to providing its clients with up-to-date and reliable market analysis and recommendations. It also has a team of experienced and knowledgeable professionals who are dedicated to providing quality service to its clients. As a result, Samuel Sekuritas Indonesia has become a preferred partner for many investors in Indonesia.
In addition to its financial services, Samuel Sekuritas Indonesia also offers a range of other services, such as corporate finance and advisory services, mergers and acquisitions, and venture capital.
