United Tractors, Good performance, CLSA

UT reported a solid FY11 result where revenue and net profit rose 48%
and 52% YoY, respectively, beating consensus estimate by 7%. UT is a
direct beneficiary of growing demand for coal given its dominance in both
heavy equipment and mining contracting business. The upside comes
from continuing strong demand for mining equipment, potential boom in
demand for construction equipment as more infra gets developed, and an
increase in production of its coal assets. BUY.

Solid FY11 result beating estimates
FY11 revenue and net profit rose 48% and 52% YoY to Rp55tn and Rp5.9tn,
respectively, beating consensus estimates by 5% and 7%. Revenue was 10%
above our forecast, but profit came slightly below expectation. Komatsu sales
rose 57% YoY contributing 70% to heavy equipment division revenue.
Normalized weather resulted in +11% and +22% YoY in coal production and
OB removal, with margin expanded by 2.3%. Lastly, coal sales rose 47% YoY.

Good momentum for 2012
We expect Komatsu sales to grow 17% YoY to 9,900 units. Jan sales were a
soft 617 units due to some orders got extended because of wet weather. We
expect Pama’s coal production and OB removal to grow 10%; Jan’ results
were ~7% of our FY target. MPU (‘mini-Pama’) will start operation in 2013 in
UT’s green-field mines. We expect coal sales to reach 5.8m tonnes (+29%
YoY). This year, potentially, production will start in some of its new mines.

More coal acquisition to come
UT is in the process of finalizing two more acquisitions in Kalimantan. Plenty
of upside as production is gradually ramped up from the new assets. Total
coal assets reserve is now 365m tonnes. Mining contributes ~8% to UT’s
profit, and to rise to 10% in next 3-5 years. This is because other businesses
(machinery and mining Contracting) are expected to grow strongly as well.

Maintain positive view on UT
UT is a direct beneficiary of growing demand for coal given its dominance in
both heavy equipment and mining contracting business. The upside to its
future earnings come from continuing strong demand for mining equipment,
potential boom in demand for construction equipment as more infra gets
developed (Komatsu is a leading player in the sector), and an increase in
production of its coal assets. UT trades at 13.5x PE12 and 11.7x PE13. BUY.

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