Initiation of coverage
Indika Energy (INDY IJ): Gold Fuels The Next Earnings Cycle
BUY
Current price:
Target price:
Upside:
Rp2,630
Rp3,050
+16.0%
Analyst
Analyst
Highlights
- Awak Mas on track for trial production by Dec 26 and commercial operations in Feb 27, with output of 100,000 oz p.a. initially and 150,000 oz by 2029.
- Kideco’s quota expected to remain stable at 30.3 mt, while DMO should stay stable at 45% of production.
- Initiate coverage with BUY and SOTP-based target price of Rp3,050.
Analysis
- The Awak Mas gold project remains on track for trial production by Dec 26 and commercial operations in Feb 27, with construction focusing on EPC works, haul roads, a tailings storage facility, a waste area, pre-mining activities, camp and office facilities, and transmission infrastructure. The initial output is targeted at 100,000 oz a year, with potential ramp-up to 150,000 oz by 2029, supported by 1.9m oz of reserves, an estimated mine life until 2041, cash cost of about US$1,150/oz, AISC of about US$1,300/oz, and all-in cost including royalties of around US$1,800/oz.
- Kideco’s mining quota is unlikely to be adjusted. Indika Energy (INDY) expects its subsidiary Kideco Jaya Agung’s (Kideco) coal production quota to remain at 30.3m tonnes. This is also in line with reports that coal miners such as Kideco that supply the national electricity utility company have not faced quota cuts. INDY’s domestic market obligations (DMO) are also expected to remain stable, as its current DMO level of 45% of production is already well above the government’s target of 30-35%.
- Net profit is poised to jump to US$101m in 2027, driven by the Awak Mas project. We expect net profit to surge in 2027 to US$101m (+125% yoy), driven by gold production of about 80,000 oz in 2027. Gold output could rise to 100,000 oz and gold prices to US$4,080/oz in 2028. On an annual basis, we project net profit growth of 642% in 2026, 125% in 2027 and 38.0% in 2028. The significant earnings growth in 2026 is due to coal price hikes, followed by a boost from the Awak Mas project when it commences operations in 2027. The contribution from gold to total net profit in 2027 is estimated at 75% with a revenue contribution of around 13%.
- Initiate coverage with BUY and SOTP-based target price of Rp3,050. We assume WACC of 9.12% and terminal value growth rate of -5% for Awak Mas. INDY trades at 7.7x 2027F PE, which is slightly above coal players’ average but below gold players’. With the completion of the Awak Mas facility and management’s target for a lower coal revenue contribution, INDY could re-rate due to lower exposure to coal.
Highlights
- Awak Mas on track for trial production by Dec 26 and commercial operations in Feb 27, with output of 100,000 oz p.a. initially and 150,000 oz by 2029.
- Kideco’s quota expected to remain stable at 30.3 mt, while DMO should stay stable at 45% of production.
- Initiate coverage with BUY and SOTP-based target price of Rp3,050.
Analysis
- The Awak Mas gold project remains on track for trial production by Dec 26 and commercial operations in Feb 27, with construction focusing on EPC works, haul roads, a tailings storage facility, a waste area, pre-mining activities, camp and office facilities, and transmission infrastructure. The initial output is targeted at 100,000 oz a year, with potential ramp-up to 150,000 oz by 2029, supported by 1.9m oz of reserves, an estimated mine life until 2041, cash cost of about US$1,150/oz, AISC of about US$1,300/oz, and all-in cost including royalties of around US$1,800/oz.
- Kideco’s mining quota is unlikely to be adjusted. Indika Energy (INDY) expects its subsidiary Kideco Jaya Agung’s (Kideco) coal production quota to remain at 30.3m tonnes. This is also in line with reports that coal miners such as Kideco that supply the national electricity utility company have not faced quota cuts. INDY’s domestic market obligations (DMO) are also expected to remain stable, as its current DMO level of 45% of production is already well above the government’s target of 30-35%.
- Net profit is poised to jump to US$101m in 2027, driven by the Awak Mas project. We expect net profit to surge in 2027 to US$101m (+125% yoy), driven by gold production of about 80,000 oz in 2027. Gold output could rise to 100,000 oz and gold prices to US$4,080/oz in 2028. On an annual basis, we project net profit growth of 642% in 2026, 125% in 2027 and 38.0% in 2028. The significant earnings growth in 2026 is due to coal price hikes, followed by a boost from the Awak Mas project when it commences operations in 2027. The contribution from gold to total net profit in 2027 is estimated at 75% with a revenue contribution of around 13%.
- Initiate coverage with BUY and SOTP-based target price of Rp3,050. We assume WACC of 9.12% and terminal value growth rate of -5% for Awak Mas. INDY trades at 7.7x 2027F PE, which is slightly above coal players’ average but below gold players’. With the completion of the Awak Mas facility and management’s target for a lower coal revenue contribution, INDY could re-rate due to lower exposure to coal.
BUY
Current price:
Target price:
Upside:
Rp2,630
Rp3,050
+16.0%
Analyst
Analyst
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