ADRO – 1Q23 earnings grew 14.5% yoy; in-line

Adaro Energy Indonesia (ADRO) managed to book net profit growth in 1Q23 despite sluggish coal prices. ADRO managed to book a net profit of USD458.04 mn for 1Q23, an increase of 14.5% yoy. For comparison, in 1Q22 the company's net profit grew 457% yoy. In 2023, the company's average selling price grew 17% yoy while ADRO managed to maintain production and sales volume so that the company's sales managed to grow 50.1% yoy to USD1.83 bn. ADRO's production and sales volume rose 29% yoy to 15.69 tonne and 15.72 tonne respectively. On the other hand, the company's cost of sales increased by 73% to USD1.07 bn. The increase in cost of sales was due to an increase in ADRO's royalty expenses. The company's royalty rate increased to 14%-28% from the previous rate of 13.5%. This is due to the implementation of taxation and non-tax state revenue since 1 January 2023. Comment : We deemed ADRO's 1Q23 results as in-line despite 1Q23 revenue and earnings are already made up around 28% of 2023F figures as we expect slower revenue and earnings power ahead amid lower ASP and bigger impact from royalty tariff hike.