• Bumitama Agri Ltd (BAL) (UNRATED) has released its 1QFY24 results. We consider BAL’s results to be within consensus as the group’s net profit is expected to pick up in the coming quarters underpinned by higher FFB production.

• BAL’s core net profit rose by 22.8% YoY to Rp373.7bil in 1QFY24 on the back of a higher sales volume of CPO. Nucleus FFB production eased by 3.8% YoY in 1QFY24. In spite of this, BAL’s CPO production rose by 9.2% due to higher FFB supplies from plasma farmers and third parties. Plasma FFB and FFB purchases from third parties climbed by 16.6% and 20% YoY respectively in 1QFY24.

• BAL hopes to achieve a FFB production (nucleus and plasma) growth of 3%-5% in FY24F. 2H is expected to account for 55%-57% of full-year FFB output compared to 54% in FY23. BAL’s nucleus FFB slid by 3.8% YoY in 1QFY24 as some of the mature areas were reclassified as plasma.

• BAL’s cash cost of production was Rp7,100/kg (RM2,141/tonne) in 1QFY24 vs. Rp6,700/kg (RM1,932/tonne) in 1QFY23. For the full year, BAL’s cash cost of production is envisaged to rise by 10% to Rp5,390/kg from Rp4,900/kg in FY23.

• The increase in the unit cash cost of production in FY24F can be attributed to 20%-25% expansion in the volume of fertiliser application. On a positive note, fertiliser prices are anticipated to fall by 15% YoY in 1HFY24.

• We understand that Indonesia is conducting B40 tests in the non-automotive industries currently. The tests are envisaged to be completed at the end of 2024F. The implementation of B40 may require 17.6mil kilolitres or 15.3mil tonnes of CPO annually. This comprise 30% of Indonesia’s 2024F CPO production of 51mil tonnes. The country’s diesel requirements are about 38mil kilolitres a year.

• BAL is presently trading at a consensus FY25F PE of 7x, which is slightly below its 5-year average of 8x.

Source: AmInvest Research - 15 May 2024