by CIMB Securities
Maintain Outperform. Harum’s 1H11 net profit of Rp612bn (+34% yoy) accounted for 33% of our full year forecast and 35% of consensus while operating profit of Rp961bn (+66% yoy) was 39% of our estimate and 38% of consensus. We regard the results as generally in line as earnings are expected to improve significantly in 2H11. The 1H11 performance was affected by delayed shipments and higher-thanexpected fuel costs in 2Q11. We expect the reversal of the delayed sales and lower fuel costs in 3Q11 to act as catalysts for the stock price and maintain our 2011-13 forecasts and price target of Rp12,000 (based on 16x forward PE). Trading at 12.3x forward P/E, HRUM remains our top pick in the coal sector and we maintain our OUTPERFORM rating.
Healthy 2Q operations but sales affected by delays. Harum produced 3.5m tonnes of coal (47% of our FY11 forecast) and sold 3.7m tonnes (44% of forecast) in 1H11. Sales in 2Q11 fell 5% qoq due to delayed shipments. The weaker sales did not come as a surprise as this was flagged by management during our visit earlier this month. Given the strong market for thermal coal, we are not concerned about the company’s ability to boost sales in the coming quarters.
3Q11 outlook: rising ASP and sales. We estimate that the ASP rose to US$95/tonne in 2Q11 from US$90/t in 1Q11 which indicates that the demand for Indonesian medium-high CV thermal coal remains strong. We expect the buoyant demand to support ASPs in 3Q11 that may translate to further upside in our estimates. We also expect production at MSJ to continue rising after its 19% qoq expansion in 2Q11. Meanwhile, the slight increase in sales at Santan Batubara suggests that the earlier problems at the mine may have been resolved, as guided earlier by management. Cash cost has come in higher than we expected at US$47.5/tonne in 1H11 (vs. our forecast of US$42/tonne). However, we expect this to reverse as the price of oil continues to ease.