The Dark Horse with Opportunities Laid Ahead in 2023
Key Takeaways :
• DSNG raked in IDR9.6tn in revenue (+35% YoY vs IDR7.2tn in FY21) on the back of all-time high CPO prices in FY22. As a result, the bottom-line achieved amounted to IDR1.21tn (+65.9% YoY vs IDR727bn in FY21), with the OPM and NPM having reached 22.6% and 12.5%.
• FFB production jumped 19% YoY, pushed by the irrigation boost provided by the moderate La Nina that spanned from 2H20 and is to subside by 2Q23.
• DSNG has initiated a new wave of replanting and added Verdant Bioscience’s, DSNG’s JV partner, premium breed that cuts off 2 years to reach prime production age and guarantees higher yields than other breeds for the first 6 years.
• DSNG managed to cut their fuel costs by IDR24bn in FY22, by the Bio-CNG they derived from recycling waste products. Another Bio-CNG reactor in the pipeline is planned to commence operations by 2Q23, withholding an additional c. IDR48bn efficiency in costs.
• We project the company's revenue to normalize by 7% in FY23E after last year's lucrative commodity boom on the back of 5% production boost and moderate prices projection.
We recommend DSNG with a BUY call and a target price of IDR860 (22% upside), implying 7.9x/1.0 PE/PBV in FY23E. We expect DSNG to thrive again in FY23E once the CPO fundamentals have priced in. Downside risks to our call include: 1) persisting elusiveness in the US economy, 2) unstable ENSO transition, and 3) delayed Indonesian CPO future exchange implementation.
MNCS Research
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