China’s policy boosted coal issuers performance

JAKARTA. China’s policy on coal production has impacted to the global coal price. Recently, China has decided to restrain the domestic coal production and to ban coal imports from North Korea.

China is considering limiting domestic coal productions by reverting coal mine working days from 330 days in a year to 276 days.

In responding to the China’s policy, prices of coal mining shares have increased during the transaction on Tuesday (21/2). During that trading day, the shares prices of Adaro Energy (ADRO), Indo Tambangraya Megah (ITMG), Indika Energy (INDY), Delta Dunia Makmur (DOID), and PTBA have increased by 1.47% to Rp 1,720 per a share, by 6.75% to Rp 16,525, by 1,36% to Rp 745, by 6,4% to Rp 665, and by 1.35% to Rp 11,250, respectively.

Corporate Secretary of PTBA Adib Ubaidillah estimates that China’s policy would impact to the demand and supply of coals. However, the magnitude of the impacts would depend on the volume of restrained imports. “That does not necessarily bring significant impact to PTBA, as most of our sales, both for domestic sales and export purpose, have been under contract,” Adib told KONTAN, Tuesday (21/2).

According to Adib, the stable price is more essential to expand the margins. PTBA estimates that the current coal price at US$ 80 per ton have been sufficient. “The price would easily drop if it is too high,” he said.

Analyst at NH Korindo Sekuritas Bima Setiaji said, China is trying to maintain the coal price to prevent banking non-performing loan (NPL). “Therefore, global coal price is potentially to rebound,” Bima said.

Productions increased

Bima also predicts that the coal issuers would intensify the productions to boost their performance in this year.

The coal price had started increasing since the quarter IV-2016. This has brought positive sentiments to the coal issuers to increase their productions. For an example, the coal productions of PTBA in 2016 increased by 2% on year on year (yoy) basis to 19.69 tons. This year, PTBA is targeting to increase the productions by 22.32% from 2016 to 24 million tons. Meanwhile, the coal productions of ADRO have increased by 2% (yoy) from 2016 to 52.64 million tons.

According to Bima, China’s policy would bring positive impacts to ITMG. “This issuer would receive a positive impact if the coal price rebounds. Therefore, this might boost its revenues significantly,” he said.

Analyst at Mirae Asset Sekuritas Indonesia Andy Wibowo Gunawan estimates, ITMG’s coal productions in the fourth quarter of 2016 would have increased by 14.3% to 7.2 million tons compared with the previous quarter, while its productions during the same period would have reached 26.2 million tons.

This year, the volume of ITMG’s sales is predicted to drop by 200,000 tons to 26 million tons. However, ITMG’s revenues might increase by 17.2% to US$ 82.6 million, thanks to the higher price.

Andy recommends ‘buy’ for ITMG with the price of Rp 19,725 per a share. Meanwhile, Bima recommends ‘buy’ for ADRO, ITMG, and with the target price of Rp 2,130, Rp 19,250, and Rp 16,525 per a share, respectively. (Muhammad Farid/Translator)