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Thursday, August 25, 2011

United Tractors - Impressive Result

by AAA Securities - TP Rp 32,700

7M11 Komatsu sales reached 5,061 units, driven by high activity of coal mining industry due to remain high and higher global coal price. We revised up our FY11 Komatsu sales from 5,800 units to 8,000 as we see coal mining industry outlook remain robust up to end of year. Mining contracting business (Pama) is the direct beneficiary of robust mining outlook, hence we forecast Pama to deliver 750 OB and 84 mn tons coal extraction. Recent new coal concessions acquisitions (of approximately 250 mn tons reserves) firm the Company target to be the big player of coal miner. We upgrade our price target to Rp 32,700 per share with BUY recommendation (40% upside).

Komatsu Sales: Impressive

UNTR showed an impressive 7M11 Komatsu sales, grew 58.1% YoY to reach 5,061 units. The achievement has exceeded our old assumption of 5,600, and let us to set a new target of 8,000 units to end of 2011. We forecast that Komatsu’s demands remain strong as the global coal price remains robust to end of 2011. The Komatsu market share is 51% in 7M11 and expected to stay at 50% in FY11.

Contract Mining Division: Inline Performance

Pama recorded inline performance result in 7M11. Overburden removal and coal extraction were 441.7 mn bcm (61.7% of our FY11 target of 716 mn bcm) and 47.8 mn tons (55.7% of our FY11 target of 85.7 mn tons), resulting stripping ratio of 9.2x. However, we do some adjustment to OB and coal extraction target to reflect current high stripping ratio. With high mining activities, we expect stripping ratio to stay at 8.9x in FY11 (OB of 750 mn bcm and Coal extraction of 84 mn tons).

Col Mining Division: an-organic grows

Coal mining division delivered 353k tons of coal, 1.5% QoQ decrease compared to previous month due to disappointing performance from DEJ coal production (6.6% QoQ lower). Total coal productions from both concessions represent 56.8% of our FY11 target. Recent coal acquisition firms that UNTR is serious to boost its mining business performance and set the long-term target as on of the big player of coal miner in Indonesia. Currently, UNTR total reserves is estimated 200-250 mn tons (including 40 mn tons from TTA, and 13 mn tons). Long-term target, UNTR expects to have 500 mn tons of reserves through acquisition.

Upgrade Price Target

We set our target price to Rp 32,700 per share to reflect higher than expected 7M11 performance result. Our TP reflects 18.9X implied PER 2012F and 8.9x EV/EBITDA 2012F. Revising-up our FY11 Komatsu sales assumption has affected significant increase to our price target. Our valuation resulted also poised by stronger Rupiah, affect to lower margin (especially in mining contracting business). We set average foreign exchange of Rp 8,700/US$ in 2011 and Rp 8,500/US$ in 2012F (Compared to average Rp 9,000 over the same period). We observes, for every 10% increase in average exchange rate, UNTR net profit will shrank by 20.4% and 12.1% in 2012F and 2013F respectively.

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