New Contract Opens Third-Party Growth Avenue
Despite weaker mining sentiment, following lower RKAB approvals, DEWA successfully secured its first mining services contract outside the BUMI Group. The co. recently signed a five-year agreement with PT Sebuku Sejaka Coal (SSC) as the main mining contractor for its and coal production of 5 Mt, with potential extension subject to concession renewal. We view this as an important milestone, broadening DEWA's customer base beyond related parties and improving earnings visibility over the medium term.
The contract strengthens our FY27 outlook, with overburden removal projected to reach 205 Mbcm (+27.3% YoY) from our FY26F estimate of 160 Mbcm. Assuming pre-mining activities commence in Aug-26 and full operations commence by Oct-26, we estimate an initial FY26 contribution of c.12 Mbcm, broadly in line with our expectation for c.15 Mbcm of additional third-party volume. We continue to expect a more meaningful earnings contribution in FY27, as our current forecast assumes only c.34 Mbcm from the SSC contract, leaving room for further upside, should operations ramp up faster than expected. Under our current assumptions, the contract could support incremental FY27 revenue of IDR 7.9 tn (+19.0% YoY) and net profit of IDR 1.1 bn (+23.2% YoY), aided by higher in-house execution and limited subcontractor involvement.

More to Mine, More to Come
Beyond the initial contract, we see meaningful potential for DEWA to expand its 3rd-party customers. Assuming the govt. gradually relaxes RKAB quotas in its quest to support domestic energy security, we expect additional opportunities from both coal and non-coal mining projects, supporting our long-term assumption of c.100 Mbcm annual 3rd-party overburden contracts. In addition, we see further upside from DEWA's existing work at the Sangatta mining area, where KPC's annual OB reaches c.450–500 Mbcm, leaving ample room for DEWA to gradually increase its in-house mining scope and capture a larger share of future contracts.

Forecast Moving Higher
Given stronger earnings visibility from the SSC contract, coupled with additional opportunities to secure third-party contracts across both coal and metal mining, we revise our long-term forecasts upward. While maintaining our 2026F revenue broadly unchanged, at IDR 6.7 tn (+4.6% YoY), we raise our 2027F revenue forecast to IDR 7.9 tn (+3.8% vs. previous; +19.0% YoY), reflecting incremental contribution from new 3rd-party projects. Although top-line revisions remain relatively modest, earnings are expected to benefit from higher operating leverage and greater in-house execution. Accordingly, we raise our 2026F net profit forecast to IDR 915 bn (+2.2% vs. previous; -78.8% YoY) and 2027F net profit to IDR 1.1 tn (+7.4% vs. previous; +23.2% YoY).

Maintain BUY with TP at IDR 800/sh
Impressed by improving execution visibility and expanding third-party contract opportunities, we maintain our BUY call on DEWA, with an unchanged TP of IDR 800/sh with higher WACC at 11.3% (from 10.0%). Our valuation implies FY27F EV/EBITDA of 11.6x, with c.156.4% upside potential. Key risks include adverse weather conditions, lower-than-expected RKAB approvals, weaker coal demand, tighter financing access and execution risk related to the Gayo project.

KLBF - A Solid Present, A Promising Future

KLBF - A Solid Present, A Promising Future

Ervina Salim

PT Kalbe Farma Tbk

19 September 2024 - 07.00am

KLBF - A Solid Present, A Promising Future

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