We downgrade our recommendation to HOLD with maintained target price of Rp 28.625, with the potential up side of 9.8%. Our consideration: 1) high EPS growth, 60% / 34% in 2014F/2015F 2) Indonesia's largest palm oil company, and became the benchmark CPO prices in the domestic market. 3) Trading at PE 2014F/2015F respectively 14,3 x/10,6x.

Results in January, CPO & Kernel sales reach Rp1,06 tn (+20% YoY), equivalent to 6.6% of our target (2014F). This result is slightly below the achievements of 2013, where January sales reached 6.9% of sales in 2013.

In January 2014, AALI produce 137.277 tonnes of CPO, an increase of 1,2% from the production in January 2013. Kernel production also increased by 3,7% YoY in January to 29.977 tonnes.

AALI in January 2014 has sold 101.486 tonnes of CPO, down -23% compared to sales in January 2013. However Kernel sales in January rose 2,2% to 30.141 tonnes. Significant results occurred in the ASP of CPO and Kernel. ASP of CPO in January recorded into Rp8.829 (the highest in the last 5 years) or increased 44% compared to January 2013. as well as ASP Kernel, in January increased 105% YoY to Rp5.500.

Opportunities ASP falling prices, at the end of the first half is very large, as was the case previously (2009-2013). Because of that, we still maintain the target ASP FY2014, amounting to Rp8.500. Although, the price of CPO ASP AALI in January has reached Rp8.829.

Source: Buana Research

Source: Buana Research

AALI CPO production in January of this year, an increase of 1,2% year on year to 137.277 tonnes. Likewise for Kernel production, increased 3.7% YoY to 29.377. Volume production showed 8%, of the target volume in 2014F. CPO sales in January, down 23% YoY drastically (vs. January 2013) to 101.486 tons, and is entirely sales in the domestic market. But for Kernel sales volume, rose 2.2% year on year to 30.141 tonnes.

Source: Buana Research

ASP AALI in January stood at Rp8.829/kg rose +44% YoY, compared to ASP January 2013, at Rp6.113/kg. When compared to December 2013, the ASP of January 2014, has risen 0.9%. The increase in ASP is in line with the price of CPO. YtD CPO price has climbed 7.34% to RM 2.859/ton (closing March 12).

Source: Buana Research

AALI revenue of CPO & Kernel in January 2013 reached Rp1, 06 tn (+20% YoY), equivalent to 6.6% / 6,9%of our targets/Consensus. This result is slightly below the achievements of 2013, where January sales reached 6.9% of sales in 2013.

Opportunities ASP falling prices, at the end of the first half is very large, as was the case previously (2009-2013). Because of that, we still maintain the target ASP FY2014, amounting to Rp8.500. Although, the price of CPO ASP AALI in January has reached Rp8.829. Although, the price of CPO ASP AALI in January has reached Rp8.829.

Source: Buana Research

We still remain on our projections, we believe economic growth (U.S., China and Indonesia) in 2015 better than the 2014 will be the catalyst for global CPO prices in 2015.

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