by Credit Suisse : ADRO
Above our expectation, in-line with market. ADRO 1H11 net profit of US$268 mn (47.2% QoQ, 405% YoY) is above our expectation, at 56% of our 2011E earnings, in-line with market at 49% of consensus’ forecast.
Higher-than-expected ASP and other income. Strong result is contributed by increase in sales volume (20.2% QoQ), ASP (12.6% QoQ) offsetting increase in cash cost ex royalties(6.3% QoQ). Higher ASP is due to new benchmark negotiated in 2Q11, which is also retroactively applied from 1Q11. Cash cost comes in line within our forecast.
Non-operational risks. ADRO settled a customer claim of US$153 mn in August due to regulatory changes in pricing. ADRO also entered a fuel swap contract on 7 June 2011, when Brent crude was averaged at ~US$115/bboe for the week. If fuel price continues to weaken, we expect impacts on earnings in 2H11.
We maintain our target price and UNDERPERFORM rating pending further review of our forecast numbers