Company Overview

Alamtri Resources Indonesia, previously known as Adaro Energy Indonesia, is undergoing a significant transformation. The company has shifted focus from its thermal coal business to renewable energy, metallurgical coal mining, and mineral processing. Its vision is to become Indonesia’s leading mining and energy group, leveraging the country’s rich natural resources including land (minerals), water (hydropower), and air (solar and wind energy).

Stock Performance and Key Metrics

The company’s stock performance has been volatile, with a 52-week high of Rp4,300 and a low of Rp2,070. The stock is currently priced at Rp2,380, with a target price of Rp2,600, representing a potential upside of 9.2%. The company maintains a “HOLD” recommendation from UOB Kay Hian, with a valuation based on the Sum of the Parts (SOTP) method.

Transition to Sustainability

In line with its sustainability goals, Alamtri Resources completed the spin-off and divestment of its thermal coal business unit, AADI IJ, on December 11, 2024. The company reduced its ownership stake in AADI IJ from 99.9% to 15.37%. This divestment marked a critical step in its transition towards green energy.

Key renewable energy projects include:

• Solar PV Project: Aiming to export 0.4 GW of solar power annually to Singapore.
• Mentarang Hydropower Plant: A 1,375 MW project in North Kalimantan, with 50% ownership shared with Sarawak Energy and Kayan Patria Pratama. Operations are expected to commence by 2030, although progress is hindered by the lack of a Power Purchasing Agreement (PPA).

The company anticipates challenges in achieving favorable Internal Rate of Return (IRR) for these projects, citing feasibility constraints and pricing issues. While the solar PV project appears more promising, the hydropower project is projected to yield a low IRR of 1.6% based on current assumptions.

Financial Performance

Alamtri Resources expects a significant decline in earnings for 2025, primarily due to the divestment of its thermal coal business. Net profit is projected to drop by 72.6% to US\$442 million in 2025. The metallurgical coal business, led by subsidiary Adaro Minerals Indonesia (ADMR IJ), will be the primary driver of medium-term profitability. Key financial highlights include:

Aluminium Project

Alamtri Resources is diversifying into the aluminium industry with a 500,000-tonne capacity project set to begin operations in 2026. The company holds a 54% effective stake in this venture. However, the project’s IRR is estimated to range between 7% and 16%, with free cash flow contributions expected to be modest (US\$18.3m–44.7m annually). The project faces challenges due to unfavorable aluminium and alumina prices, although future price improvements could enhance profitability.

Valuation and Recommendation

UOB Kay Hian maintains a “HOLD” recommendation for Alamtri Resources Indonesia, with a reduced target price of Rp2,600 (from Rp2,800). The valuation considers the company’s core metallurgical coal business, its remaining stake in AADI IJ, and its net cash position for 2025. The target price corresponds to a 2.4x 2025 EV/EBITDA multiple.

SOTP Valuation Breakdown:

• AADI (15.37% stake): Valued at US\$208m or Rp108 per share.
• Core Business: Valued at US\$1,989m or Rp1,035 per share.
• Net Cash (2025F): Valued at US\$3,001m or Rp1,561 per share.

The cumulative valuation amounts to Rp2,596 per share, rounded to Rp2,600.

Conclusion

Alamtri Resources Indonesia is navigating a transformative journey from coal to green energy, with ambitious projects in solar, hydropower, and aluminium. While its commitment to sustainability is commendable, execution risks and financial challenges remain significant. Investors are advised to exercise caution, as the company’s profitability and valuation hinge on the successful implementation of its strategic initiatives.