The construction of Krakatau Steel Tbk (KRAS)’s blast furnace complex that had reached 96% on July 2016 is predicted to cut the HRC production cost worth US$ 58,3 per ton. The cost saving comes from the decreasing cost of raw materials, electricity consumption, and balancing the upstream and downstream production facilities.
Blast complex furnace with hot metal and pig iron production capacities of 1,2 million metric tons per year is ready to operate this year. According to Bahana Securities, KRAS’ expansion and efficiency strategy will improve the company’s performance. The steel demand is expected to increase as well as the infrastructure project constructions that have been the government’s priority.
“We expect a recovery in steel price to continue with the decline in supply which is caused by the closing of Megasteel, a Malaysian steel company and the trimmed local steel production capacity in China,” said Mardy Oramahi Alhusnah, Analyst of Bahana Securities.
Bahana Securities recommended BUY for KRAS with a target price of 1.020 IDR. (*)
| KRAS’ Projection and Valuation | |||
| Note | 2015 | 2016E | 2017E |
| Sales (USD million) | 1,322 | 1,481 | 1,641 |
| EBIT (USD million) | -184 | 41 | 108 |
| Net profit (USD million) | -320 | -92 | -28 |
| EPS (IDR) | -274 | -89 | -18 |
| EV/EBITDA (x) | -21 | 23 | 15 |
| P/E (x) | -3 | -14.4 | -47 |
| PBV (x) | 0.5 | 0.7 | 0.7 |
| EBIT margin | -13.9 | 2.7 | 6.7 |
| Source: Bahana Securities | |||
Add Comment