Equity Research

United Tractors SELL

UNTR IJ / UNTR.JK (Unchanged)

Company Updates l BCAS Vignette l Heavy Equipment Sector

20 April 2017

Strong 1Q17, but in line Darmawan Halim

darmawan.halim@bcasekuritas.co.id
Facts: 1Q17 net profit of IDR1.5tn (+105.5% YoY, -19.9% QoQ) +6221 23587222 ext 168
1Q17 net profit stood at IDR1.5tn, up by 105.5% YoY but down by 19.9%
QoQ, and was relatively in line with ours and consensus estimate at 24.7%
and 23.3% of full year forecast. The increase in net profit YoY was due Current Price: IDR27,850
higher revenue (+27.9% YoY) from better overall sales volume (exhibit Target Price: IDR24,500
3), as well as improvement in margins and lower forex loss (-86.6% YoY). (Unchanged)
On QoQ basis, revenue rose by 17.5% QoQ from higher HE and coal sales, Downside potential: -12.0%
but net profit declined by 19.9% amid lower margin and reversal from
forex gain to forex loss.
1Q17 revenue was actually slightly ahead at 26.2% of our full year 12M PRICE PERFORMANCE
estimate on the back of higher HE volume (+42.8% QoQ, +69.7% YoY to
(IDR) (%)
847 units), and coal sales (+78.9% QoQ and +8.5% YoY) but were
35,000 80.0
already expected. The negative surprise came from mining contracting
60.0
gross margin that edged down to 15.5% in 1Q17 from 16.9% in 1Q16 30,000
40.0
despite higher revenue (+12.8% YoY to IDR6.3tn) and relatively flat 25,000
20.0
volume (+1.6% YoY to 25mn tons), on the back of higher elimination 20,000
account from its own coal mining Tuah TA., while on the pre-elimination -
15,000
basis, gross margin actually improved to 20.4% from 19.8%. (20.0)
10,000 (40.0)
Balance sheet remains very healthy with a net cash position of IDR15.3tn,
UNTR IJ (LHS) Rel. to JCI performance (RHS)
or IDR4,098/share.
Vol (mn) 14

Outlook: HE to remain strong in 2Q17, and contracting output to rise 7

Our conversation with UNTR reveals that HE may still be relatively strong -
coming into 2Q17 as there are still some backlog orders, but the company still Apr-16 Aug-16 Dec-16 Apr-17
maintains its full year target of 2,700 units, vs. ours of 2,800 units (+28.3% Source: Bloomberg
YoY). In the mean time, coal output from mining contracting is expected to
gradually rise as the country is entering dry season.
STOCK PERFORMANCE

Recommendation: Maintain Sell YTD 1M 3M 12M

As we previously mentioned, UNTRs strong 1Q17 results were already Absolute 31.1% 3.1% 28.3% 67.8%
expected, mainly on the back of strong HE sales, although margin on mining JCI Return 5.8% 1.2% 5.9% 15.2%
contracting was a bit of a disappointment. Thus, as we believe that this has Relative 25.2% 2.0% 22.5% 52.5%
already priced-in, we maintain our Sell recommendation with TP of IDR24,500. Source: Bloomberg
Risk: coal price remains elevated.

FINANCIAL HIGHLIGHT
Exhibit 1. Revenue breakdown
EV/EBITDA EPSG P/E P/B
(x) (%) (x) (x)
2016 7.7 29.8 20.8 2.5
0.0% 0.0% 2.7% 3.9% 4.3% 3.7% 2017F 6.9 21.4 17.1 2.3
7.5% 8.8% 7.7% 2018F 6.3 5.7 16.2 2.1
11.3% 12.0% 15.2%
Source: BCA Sekuritas

MARKET DATA
61.9% 63.0% 61.9% 52.7% 52.2% 46.0% 12M price range (IDR) : 12,800 - 29,150
12M PE range (x) : 9.5 - 17.9
Outstanding shares (mn) : 3,730
Market cap (IDRbn)/(USDmn) : 103,884 / 7,812
Avg daily turn. (IDRbn/USDmn) : 99.1 / 7.5

35.0% Source: Bloomberg

30.7% 28.2% 27.6% 32.1% 31.5%

SHAREHOLDERS
2013 2014 2015 2016 1Q16 1Q17 PT Astra International Tbk : 59.5%
Others (each below 5%) : 40.5%
Construction Machinery Mining Contracting Coal Contractor Source: Bloomberg

Source: Company, BCA Sekuritas

Exhibit 2. 1Q17 results summary
UNTR
Profit and loss statement (IDRbn) 1Q16 4Q16 1Q17 QoQ (%) Y oY (%) 3M17/BCAS 3M17/Cons.

Revenue 10,696 11,643 13,679 17.5 27.9 26.2 25.7

COGS 8,810 8,562 10,822
Gross profit 1,886 3,081 2,857 (7.3) 51.5
EBIT 1,270 2,115 2,085 (1.4) 64.1 26.9 25.4
Other income/(expenses)
Net interest income/(expense) 26 53 80 51.3 211.4
Net forex gain/(losses) (398) 295 (53) n.a (86.6)
Others 52 134 (62) n.a n.a
Pre-tax profit 950 1,923 2,050 6.6 115.7
Net profit 731 1,875 1,501 (19.9) 105.5 24.7 23.3

gross profit margin (%) 17.6 26.5 20.9

operating margin (%) 11.9 18.2 15.2
Net margin (%) 6.8 16.1 11.0

Balance sheet (IDRbn)

Cash and equivalents 16,640 19,461 19,967
Total liabilities 22,045 21,369 30,039
Total assets 61,884 63,991 74,293
Interest bearing liabilities 2,035 1,113 4,682
Equity 39,839 40,860 42,337

ROA (%) 4.7 11.7 8.1

ROE (%) 7.3 18.4 14.2
Gearing (%) 5.1 2.7 11.1
Net gearing (%) nc nc nc

Source: Company, BCA Sekuritas,

Exhibit 3. 1Q17 revenue and gross margin breakdown

1Q16 4Q16 1Q17 QoQ (%) YoY (%) 3M17/BCAS
Revenue Breakdown
Construction Machinery 3,371 3,969 4,792 20.7 42.2 28.0
Mining Contracting 5,583 6,272 6,299 0.4 12.8 23.6
Coal Mining 1,284 898 2,082 131.8 62.1 33.2
Construction 458 504 506 0.4 10.5 24.5

Gross Margins (%)

-Construction Machinery (%) 17.2 25.0 19.3
-Mining Contracting (%) 16.9 24.5 15.5
-Coal Mining (%) 22.5 52.9 42.0
-Construction (%) 16.0 15.5 15.4

Unit
Construction Machinery (Unit) 499 593 847 42.8 69.7 30.3
Overburden (mn bcm) 165 177 170 (4.3) 2.6 21.9
Mining Contracting (mn ton) 25 31 25 (18.3) 1.6 21.6
Strip Ratio (x) 6.7 5.8 6.8 17.2 1.0 101.3
Coal Mining (mn ton) 1.8 1.1 1.9 78.9 8.5 26.1

Source: Company, BCA Sekuritas,

United Tractors, 20 April 2017 2

 Teguh Hartanto
Director of Equity, ext: 129
teguh.hartanto@bcasekuritas.co.id

RESEARCH DIVISION
research@bcasekuritas.co.id

Darmawan Halim Arga Samudro Jennifer Frederika Yapply

Head of Research, ext: 168 FI Analyst, ext: 181 Equity Analyst, ext: 179
Strategy, Automotive, Heavy Equipment FI Strategies & Macroeconomist Cigarettes, Consumer, Health Care
darmawan.halim@bcasekuritas.co.id arga.samudro@bcasekuritas.co.id jennifer.yapply@bcasekuritas.co.id

Aditya Eka Prakasa Johanes Prasetia Michael Ramba

Equity Analyst, ext: 182 Equity Analyst, ext: 185 Equity Analyst, ext: 184
Telco, Coal, Metal Mining Retail, Poultry Construction, Property Residential
aditya.prakasa@bcasekuritas.co.id johanes.prasetia@bcasekuritas.co.id michael.ramba@bcasekuritas.co.id

Nyoman Widita Prabawa Achmad Yaki Yamani Yuni Pratiwi

Equity Analyst, ext: 180 Technical Analyst, ext: 186 Research Assistant, ext: 183
Cement, Plantation, Oil & Gas Technical Analyst
nyoman.prabawa@bcasekuritas.co.id achmad.yamani@bcasekuritas.co.id yuni.pratiwi@bcasekuritas.co.id

EQUITY CAPITAL MARKET DIVISION

ecm@bcasekuritas.co.id

Ermawati Agustina Erman

Head of Institutional Sales, ext: 159
ermawati.erman@bcasekuritas.co.id

Amru Fernando
Haslienda Santoso Jodikin Arief Iskandar
Equity Capital Market, ext: 137 Sales Trader, ext: 164 Institutional Dealer, ext: 136
haslienda.rifman@bcasekuritas.co.id santoso@bcasekuritas.co.id arief.iskandar@bcasekuritas.co.id

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United Tractors, 20 April 2017 3