May 19, 2025
Resilient Amid Coal Price Pressure, Poised for a Strong Rebound

Market Commentary
0 comments
Adaro Andalan Indonesia (AADI) delivered a resilient performance in 1Q25 despite facing pressure from lower coal prices. Net profit fell 29% year-on-year, mainly due to a 16% decline yoy in average selling prices (ASP) to $68 per ton. Revenue also declined by 12% to $1.1 billion. However, AADI’s operational strength was evident in its ability to maintain coal sales volume, which rose 3% yoy to 16.4 million tons, while cutting its cash cost by 12% to $51.7 per ton. This cost efficiency helped preserve a solid cash margin of $16.3 per ton and reflects the company’s effective operational management amid a challenging pricing environment.
 


Looking ahead, AADI stands to benefit from Indonesia’s revised coal royalty regulation, which reduces the rate from 28% to 19% for exports priced above $120 per ton. This structural change is expected to lift margins and has prompted a 5.2% upward revision to the company’s full-year 2025 earnings forecast, now estimated at $900 million. Importantly, this puts AADI on track to maintain profit levels in line with last year, despite the coal price correction. Such regulatory support adds a strong cushion to the company’s earnings outlook.



Financially, AADI remains in a robust position with $1.4 billion in cash, allowing for generous dividend distributions and flexibility for future acquisitions or expansion. The company is also trading at attractive valuation levels, with a return on invested capital (ROIC) of 30%—well above its cost of capital—highlighting strong business profitability. Moreover, with ongoing geopolitical tensions in Asia and the Middle East, coal prices could rebound, offering additional upside potential for AADI.
 


In light of its strong fundamentals, operational efficiency, healthy balance sheet, and positive regulatory tailwinds, we reiterate a BUY recommendation for AADI. The stock is currently trading at around Rp7,775, while the target price is set at Rp30,100—offering a potential upside of over 387%. For long-term investors seeking value in Indonesia’s energy sector, AADI remains a compelling opportunity.
 

Comments


Contact Us
We are happy to answer any questions you may have
Address
Sahid Sudirman Center
Jalan Jend. Sudirman Kav.86, Lantai 12
Karet Tengsin, RT.10/RW.11
Daerah Khusus Ibukota Jakarta
10220