Bumitama Agri - UOB Kay Hian 2023-08-14: 1H23 Above Our Expectations; Surprisingly Good ASP

• Bumitama Agri’s 1H23 results beat our and consensus expectations, thanks to its higher-than-peers CPO ASP and higher CPO production. 2H23 earnings may come in stronger h-o-h with higher CPO ASP and lower production cost.
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• Maintain BUY on Bumitama Agri with a target price of S$0.65.

1H23 results above expectation.

• Bumitama Agri (SGX:P8Z)’s 1H23 earnings came in at Rp1,015b (+24% h-o-h, -56% y-o-y), accounting for 58% of our full-year forecast.
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• 1H23 results came in higher h-o-h, due to:
  1. Higher-than-expected production and sales volume, especially in 2Q23. The higher-than-expected output was mainly supported by the 29% q-o-q rise in FFB yield and the improving oil extraction rates at 22.6% in 2Q23 (1Q23: 22.1%). We reckon that the strong FFB yield and OER improvement was mainly due to the better agro-management that led to better productivity.
  2. Higher-than-market CPO and PK ASP. Note that Bumitama Agri’s CPO ASP usually lags by 1-2 months due to the timing of delivery and hence Bumitama Agri’s 2Q23 CPO ASP outperformed its peers.
• Higher q-o-q net profit in 2Q23, thanks to higher FFB and CPO production which had increased by 30% and 8% respectively.
• Interestingly, Bumitama Agri’s CPO ASP had strengthened by 1% q-o-q to reach Rp11,756/kg in 2Q23, despite the market price of CPO dropping by 10% q-o-q.

Higher margin in 2H23.

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Jacquelyn Yow Hui Li UOB Kay Hian Research | Leow Huey Chuen UOB Kay Hian | https://research.uobkayhian.com/ 2023-08-14 SGinvestors.io

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