01 November 2017

United Tractors (UNTR IJ)

Results Note
BUY (Unchanged)

Stock Data Another upgrade on strong results

Target price (Rp) Rp40,000
Strong growth owing to PAMA and Komatsu solid performance in 3Q17.
Prior TP (Rp) Rp32,000
Equity | Indonesia | Commodities

Shareprice (Rp) Rp34,675 We raise machinery sales forecast as mining sector demand recovered.

Upside/downside (%) +15.4 PAMA to deliver higher margin as contract price improved.
Sharesoutstanding (m) 3,730 Maintain Buy with higher TP of Rp40,000 (from Rp32,000).
Marketcap. (US$ m) 9,536
Free float (%) 40.5 Solid earnings growth in 3Q17. UNTR recorded net profit of Rp5.46tn in 9M17,
Avg. 6m dailyT/O (US$ m) 7.6 up 80% yoy, accounting for 74% of our FY17F estimate (inline) while reaching
79% of consensus’ FY17F forecast (above). Net profit was recorded at Rp2.21tn in
Price Performance 3Q17, up 15% qoq and 74% yoy, backed by solid PAMA’s operating performance
3M 6M 12M and strong Komatsu sales. We believe UNTR’s earnings to remain strong in 4Q17F
Absolute (%) 18.8 38.4 55.7 on the back of higher contribution from PAMA as we expect 28% of coal mining
and OB removal volumes will be recorded in 4Q17F. Please note that in 2016,
Relative to JCI (%) 14.8 32.8 44.2
72% of PAMA’s coal mining and OB removal volumes were recorded in 9M16 while
52w high/low (Rp) 34,950 - 19,525
the remaining 28% were booked in 4Q16 due to more favorable weather.
170
160
150 Raise heavy equipment sales as mining sector demand recovered. As
140 machinery demand from mining sector recovered and likely to remain strong in
130
FY18F, we raise our heavy equipment sales forecast to 3,400-3,500 units for
120
110
FY17F-18F, respectively. Heavy equipment sales reached 993 units (+9.8% qoq,
100 +80% yoy) in 3Q17 and 2,744 units (+73% yoy) in 9M17 with sales to the mining
90
sector formed 50% of total sales (from 26% in 9M16). We forecast heavy
Apr-17May-17May-17

Aug-17Sep-17Oct-17
Jun-17

Oct-17

equipment sales to reach 600-700 units in 4Q17F, translating to FY17F sales of

Jul-17Jul-17
Oc t-16Nov-16Dec -16J an-17J an-17Feb-17Mar-17Mar-17

UNTR-Rebase JCI Index-Rebase 3,400 unit (+56% yoy), before increasing further to 3,500 units in FY18F.

Major Shareholders PAMA to deliver higher margins. We maintain our forecast for PAMA’s coal
mining and over burden (OB) removal volumes but raise contract price
Astra International 59.5%
assumption by 5% as we note that PAMA’s contract price improved in 9M17. PAMA
recorded coal mining and OB removal growth of 4.8% and 11.7% yoy,
respectively in 9M17. However, mining contracting revenues increased by 19.7%
Estimate Change; Vs. Consensus yoy which indicates higher contract price in the period. With this new pricing
assumption we raise mining contracting division’s gross margin by around 5%.
2017F 2018F
Latest EPS (Rp) 2,082 2,495
Maintain Buy with higher TP. We maintain our Buy recommendation on UNTR
Vs. Prior EPS (%) 1.2 1.3 with higher DCF-based (WACC: 12.1%; TG: 3%) target price of Rp40,000 (from
Vs. Consensus (%) 9.3 14.5 Rp32,000) as we rolled over our base valuation date to 2018, upgrade our EBIT
Source: Bloomberg
forecast by 23% for FY18F as we raise Komatsu sales volumes to 3,500 units
(from 3,000) and upgrade mining contracting revenues and gross profit by 5%
and 30%, respectively for FY18F. We believe coal mining industry’s capex will
improve in FY18F which will be positive for Komatsu sales. We forecast stripping
ratio of PAMA’s clients will increase from 7.1x in FY17F to 7.5x FY18F. With 15%
upside to our new TP we reiterate our Buy rating and UNTR remains our top-pick
in the mining sector.
Year To 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue (RpBn) 49,347 45,539 62,910 70,603 78,222
EBITDA (RpBn) 5,390 4,387 8,475 10,501 11,720
EBITDA Growth (%) (12.6) (18.6) 93.2 23.9 11.6
Net Profit (RpBn) 3,853 5,002 7,766 9,307 10,290
EPS (Rp) 1,033 1,341 2,082 2,495 2,759
EPS Growth (%) (28.1) 29.8 55.3 19.8 10.6
Net Gearing (%) (32.6) (43.0) (37.2) (39.1) (38.0)
PER (x) 33.6 25.9 16.7 13.9 12.6
Frederick Daniel Tanggela PBV (x) 3.3 3.0 2.8 2.6 2.4
PT Indo Premier Sekuritas Dividend Yield (%) 2.3 1.7 2.3 3.6 5.0
frederick.daniel@ipc.co.id EV/EBITDA (x) 21.6 25.3 13.3 10.4 9.3
+62 21 5793 1170 Source: UNTR, IndoPremier Share Price Closing as of : 31-October-2017

Refer to Important disclosures in the last page of this report

UNTR Results Note

Fig. 1: Revenues Fig. 2: Gross profit

Construction Machinery Mining Contracting Coal Mining

Construction Machinery Mining Contracting Coal Mining

50 12 11.2

40.8 10 9.5
9.2
40
33.5 34.6 7.6
31.6 8 7.3
30.5 29.6

)(Rptn
30 26.0 27.7 5.9
(Rptr)

6 4.5 5.0 5.3

24.0 23.5 4.9
15.6 3.2
4 3.7 3.6
20 13.6 2.8
15.0 14.6
1.7 2.1 2.1
2 1.9
1.0
10 7.1 7.1 6.5
3.8 4.7 3.8 5.1
-
0 -0.1
(2) -0.8
2013 2014 2015 2016 2017F 2018F 2019F
2013 2014 2015 2016 2017F 2018F 2019F

Source: UNTR, IndoPremier Source: UNTR, IndoPremier

Fig. 3: Heavy equipment sales volumes Fig. 4: Heavy equipment revenues

Heavy equipment sales (industry - LHS) Heavy equipment sales Spare part and service revenues

UNTR's heavy equipment sales (LHS) 25

Market share (RHS)

20
24 50%
41% 40%
15
20
)units

36% 36% 36% 36% 40%

(Rp tn)

32%
16
30% 10
(thousand

12
20% 5
8

10%
4
-
2013 2014 2015 2016 2017F 2018F 2019F
0 0%
2013 2014 2015 2016 2017F 2018F 2019F
Source: UNTR, IndoPremier

Source: UNTR, IndoPremier

Fig. 6: Coal sales volumes and ASP

Fig. 5: Mining contracting volumes
Coal sales volumes (LHS) ASP (RHS)

mining volumes (mn tons - LHS) OB removal (mn Bcm - LHS)

16 150
UNTR clients' SR (RHS)
13 87.4 100
77.2 77.2
69.2 71.1
61.6 55.9
1,400 10.0 10
8.0
US$perton

8.0
mtons

7.5 50
1,200 7.1 7.0 7.1 8.0 6.8 6.8 6.8 6.8
6.4
1,011 7 5.7
1,000 903 6.0 4.6
845 4.2 0
806 814 4
800 767 4.0
702
(x)

-50
600 2.0 1

400 - 2013 2014 2015 2016 2017F 2018F 2019F

-2 -100

200 105 114 109 109 115 120 126 (2.0)

0 (4.0) Source: UNTR, IndoPremier

2013 2014 2015 2016 2017F 2018F 2019F

Source: UNTR, IndoPremier

Refer to Important disclosures in the last page of this report 2

UNTR Results Note

Fig. 7: 3Q17 results summary

9M17 /
(RpBn) 9M17 9M16 % Y-Y 3Q17 % Q-Q % Y-Y FY17F
FY17F
Revenues 46,258 33,897 36.5 16,828 6.8 48.5 62,910 73.5
COGS 35,819 27,317 31.1 12,638 2.3 41.9
Gross profit 10,439 6,580 58.6 4,190 23.5 72.5 14,627 71.4
G&A expenses 1,871 1,568 19.3 654 4.8 25.5
Selling expenses 599 422 42.0 248 45.2 65.9
Operating profit 7,970 4,591 73.6 3,287 26.5 87.0 10,545 75.6
Net interest inc. (exp) 94 138 (32.3) (2) (111.9) (102.3)
Forex gain (loss) (13) (644) (98.0) 62 (393.5) (142.6)
Other (180) 47 (486.3) (111) 1,547.5 (1,485.7)
Pretax profit 7,871 4,132 90.5 3,236 25.2 90.2 10,479 75.1
Tax 1,973 950 107.6 914 56.1 131.6
Minority Interest 260 55 375.7 107 36.7 222.8
Net profit 5,638 3,127 80.3 2,215 15.3 74.0 7,766 72.6

GPM (%) 22.6 19.4 24.9 23.3

OPM (%) 17.2 13.5 19.5 16.8
Pretax mgn (%) 17.0 12.2 19.2 16.7
NPM (%) 12.2 9.2 13.2 12.3
Source: UNTR, IndoPremier

Fig 8. Earnings revisions

FY17F FY18F
(RpBn)
old new (%) change old new (%) change
Machinery sales (units) 3,000 3,400 13.3 3,000 3,500 16.7
OB removal (m bcm) 803 814 1.4 903 903 -
Coal production (m tons) - PAMA 115 115 - 120 120 -

Revenues (Rp bn) 55,967 62,910 12.4 62,907 70,603 12.2

Gross profit 12,289 14,627 19.0 14,175 17,101 20.6
Operating profit 8,658 10,545 21.8 10,220 12,661 23.9
Pretax profit 8,667 10,479 20.9 10,377 12,559 21.0
Net profit 7,672 7,766 1.2 9,186 9,307 1.3

Margins (%)
GPM 22.0 23.3 1.2 22.8 22.6 (0.2)
OPM 15.5 16.8 1.2 17.0 16.3 (0.7)
Pretax mgn 15.6 16.7 1.1 17.5 16.6 (1.0)
NPM 13.8 12.3 (1.5) 14.7 14.7 (0.1)
Source: IndoPremier

Refer to Important disclosures in the last page of this report 3

UNTR Results Note

Year To 31 Dec (RpBn) 2015A 2016A 2017F 2018F 2019F

Income Statement

Net Revenue 49,347 45,539 62,910 70,603 78,222

Cost of Sales (37,645) (35,878) (48,283) (53,502) (59,318)
Gross Profit 11,702 9,661 14,627 17,101 18,904
SG&A Expenses (3,116) (2,955) (4,082) (4,440) (4,919)
Operating Profit 8,586 6,706 10,545 12,661 13,985
Net Interest 72 191 38 (17) (8)
Forex Gain (Loss) 564 (149) (29) 0 0
Others-Net (5,030) (19) (75) (85) (92)
Pre-Tax Income 4,193 6,730 10,479 12,559 13,886
Income Tax (1,400) (1,626) (2,473) (2,964) (3,277)
Minorities 1,061 (102) (240) (288) (318)
Net Income 3,853 5,002 7,766 9,307 10,290

Balance Sheet

Cash & Equivalent 15,413 19,461 21,261 24,380 25,754

Receivable 12,170 12,115 15,450 17,339 19,210

Inventory 8,328 7,108 9,144 10,262 11,370

Other Current Assets 3,349 3,514 2,918 3,275 3,629

Total Current Assets 39,260 42,197 48,774 55,257 59,963

Fixed Assets - Net 17,519 16,685 17,415 18,255 19,990

Goodwill 0 0 0 0 0

Non Current Assets 3,000 3,804 2,996 3,362 3,725

Total Assets 61,715 63,991 70,555 78,313 85,189

ST Loans 1,169 1,028 1,079 1,133 1,190

Payable 13,407 14,119 0 14,645 16,226

Other Payables 3,704 3,208 3,720 4,175 4,625

Current Portion of LT Loans 0 0 0 0 0

Total Current Liab. 18,280 18,356 17,849 19,954 22,041

Long Term Loans 1,453 85 3,200 3,520 3,872

Other LT Liab. 2,732 2,732 3,911 4,390 4,863

Total Liabilities 22,465 21,173 24,960 27,863 30,777

Equity 12,672 12,658 11,107 11,147 11,186

Retained Earnings 25,248 28,202 32,967 37,614 41,389

Minority Interest 1,331 1,762 1,521 1,688 1,837

Total SHE + Minority Int. 39,250 42,622 45,595 50,450 54,412

Total Liabilities & Equity 61,715 63,795 70,555 78,313 85,189

Source: UNTR, IndoPremier

Refer to Important disclosures in the last page of this report 4

UNTR Results Note

Year to 31 Dec 2015A 2016A 2017F 2018F 2019F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 3,853 5,002 7,766 9,307 10,290

Depr. & Amortization 3,893 3,467 2,820 2,944 3,085
Changes in Working Capital (3,697) (2,862) (7,084) (4,379) (2,618)
Others 7,990 4,398 2,463 4,102 2,445
Cash Flow From Operating 12,039 10,005 5,966 11,974 13,202
Capital Expenditure (3,399) (2,817) (2,800) (3,000) (4,000)
Others (408) 331 350 398 445
Cash Flow From Investing (3,807) (2,485) (2,450) (2,602) (3,555)
Loans (807) (1,509) 3,166 374 409
Equity 0 0 0 0 0
Dividends (2,988) (2,195) (3,001) (4,660) (6,515)
Others 6 676 (1,266) (1,277) (1,402)
Cash Flow From Financing (3,789) (3,028) (1,101) (5,563) (7,509)
Changes in Cash 5,353 4,048 1,801 3,119 1,374

Financial Ratios

Gross Margin (%) 23.7 21.2 23.3 24.2 24.2

Operating Margin (%) 17.4 14.7 16.8 17.9 17.9
Pre-Tax Margin (%) 8.5 14.8 16.7 17.8 17.8
Net Margin (%) 7.8 11.0 12.3 13.2 13.2
ROA (%) 6.3 8.0 11.5 12.5 12.6
ROE (%) 9.9 12.2 17.6 19.4 19.6
ROIC (%) 10.5 13.8 19.4 20.3 20.5

Acct. Receivables TO (days) 90.9 90.3 74.3 79.9 80.4

Acct. Receivables - Other TO (days) 4.3 7.1 5.7 4.8 4.9
Inventory TO (days) 4.7 4.6 5.9 5.5 5.5
Payable TO (days) 123.0 140.0 102.7 94.5 95.0
Acct. Payables - Other TO (days) 5.5 4.9 4.1 4.3 4.3

Debt to Equity (%) 6.7 2.6 9.4 9.2 9.3

Interest Coverage Ratio (x) 0.0 0.1 0.1 0.1 0.1
Net Gearing (%) (32.6) (43.0) (37.2) (39.1) (38.0)

Source: UNTR, IndoPremier

Refer to Important disclosures in the last page of this report 5

 Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167

INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any
responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for
general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell
any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this
report.