Defying El-Nino: Productivity Growth Achieved
Key Takeaways :
▪️ DSNG’s plantation productivity gained in spite of El Nino concerns, bearing fruit to a solid total FFB production growth by 2.6% YoY, reaching 2.27mn ton in FY23 (reflecting 100.5% of our estimate). CPO production came in at 661.9k tons, growing 3.5% YoY.
▪️ This was accompanied by a slightly higher ASP of IDR11.4mn/ton. The higher ASP is due to the superior FFA (average of 2.97% in FY23 vs. 3.79% in FY22).
▪️ With the ENSO cycle predicted to reach its neutral phase into 2H24 without adverse effects from the current El Nino, plantation productivity should increase in FY24E.
▪️DSNG has completed their second Bio-CNG plant in their Muara Wahau plantations. With the total capacity now having reached 850 m3/hour of Bio-CNG, we estimate the diesel-saving capacity to reach 9.06mn – 11.38mn liters; further expanding their earnings margin potential.
▪️ We recommend BUY for DSNG, with a TP of: IDR690 which implies PE/PBV 7.1x/0.8x, as well as a EV/ha of IDR94.0mn/ha in FY24E. Risks to our call would include: 1) fertilizer and CPO prices volatility, 2) weather surprises, and 3) labor turnovers.
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