We maintain our BUY recommendation on AALI with a new target price of Rp28.625 (previous target Rp26.400). We raise CPO ASP assumptions for 14F/15F by 6%/4% to Rp8000/Rp8.300 per Kg. The revision causes a rise in our net profit forecast in 14F/15F to Rp 2,8 tn/Rp3,7 tn or +11% / +6% increase from the previous projection. The target volume of CPO remains as we stand at 1.7 bn/1.9 bn tons in 14F/15F.

CPO price successfully encounter RM 2.830/ton price level, highest in the last 16 months. The price has gained 11% MtD or 7% YtD. AALI auction price has touched Rp10.480/kg, 6% increase MtD or 4% YtD. Compared to last year, prices have gained 18%.

The CPO price increases is driven by the supply side (lower stock/production) as Malaysia’s CPO in January down by -3%/-9% MoM. Additionally, in Indonesia, biodiesel mandatory factor and the increase in domestic consumption plays its role in the CPO price increase.

AALI net profit in 2013 fell -28% YoY to Rp1,8 tn. It formed 103%/115% towards our forecast/consensus. AALI sales in 2013 grew +10% YoY to Rp12,7 tn. The results books 99%/110% of our target / consensus.

At current prices, AALI, trades at PE 14F/15F of 14x/10,9x respectively. EPS growth is interesting as we look into 14F/15F of 55%/32% with ROE ratio in 14F/15F of 23% / 25%.

Source: Company Reports, Buana Research

Source: Company Reports, Buana Research

Global palm oil prices resumes its strengthening trend. This tren is strongly related to the conditions of the major CPO producer countries such as Malaysia and Indonesia. Production Malaysia in January fell -9% MoM or -5.8% YoY to 1,5 million ton . CPO stock in Malaysia in January fell by -3% MoM to 1,93 million tons. On th other hand, Indonesia's domestic consumption of palm oil will increase this year for both the industrial sector (biodiesel) and consumption (food ingredient). This condition makes manufacturers focus on local markets than export. Both condition being stated, stock of CPO for the global market decreases. Assuming the demand of America that still continues to grow, we are optimistic that the global CPO prices will continue to rise.

Source: Company Reports, Buana Research

In AALI’s current tender report, the tender price reached Rp10.000/kg level or precisely Rp10.480/kg. This price is not much different from the tender price at the beginning of the year whi ch i s Rp10.000/kg. This puts our ASP price target in 14F/15F which is Rp7.500/Rp8.000 per kg below their average agreed tender price. We raise our ASP targets for 14F/15F Rp8.000/Rp8.300 per kg, up by +6% / +4%. The increases in the ASP target implies that our net profit forecast in 14F/15F to Rp2,8 tn/Rp3,6 tn, up +11% / +6% from the previous projection. We maintain our CPO sales volume growth in 14F/15F respectively at +9% and 10%.

Source: Company Reports, Buana Research

*Marolop A Nainggolan is Head of Research of PT Buana Capital. This article is part of the Equity Research of PT Buana Capital