Pertamina Geothermal Energy (PGEO.IJ Rp 975; BUY TP Rp1,200) Organic Expansion Finally Bearing Fruit; Re-initiate coverage with Buy rating

Stock Code	Last Price	Change	Change %
RATU	6,600	350	5.60%
DNET	9,500	325	3.54%
BNLI	3,260	300	10.14%
BALI	1,815	205	12.73%
PANI	11,600	200	1.75%
TPIA	9,675	175	1.84%
DATA	1,340	160	13.56%
RDTX	12,300	150	1.23%

Pertamina Geothermal Energy (PGEO IJ)

Organic Expansion Finally Bearing Fruit; Re-initiate coverage with Buy rating

PGEO plans to add 55MW of capacity in May25 from Lumut Balai unit 2.
We expect moderate earnings growth of +3.3%/+2.7% in FY25-26F as we forecast overall ASP to increase by +2.6% yoy.
Resume coverage with a BUY rating and TP of Rp1,200. Key risks include lower availability/capacity factor and delays in the project timeline.

Organic expansion finally bearing fruit

PGEO will add 55MW of geothermal capacity through Lumut Balai unit 2, expected in May25, which marks its first capacity addition since its IPO in FY23 and will bring the total installed capacity to 728MW. The next step towards its 1GW goal in FY28 will be derived from the operation of Hululais unit 1 and 2 in 2027 (110MW), and co-generation projects with PLN (of which 45MW have been announced in Ulubelu of 30MW and Lahendong of 15MW), as well as developing greenfield capacity of c.400MW.

A slow but steady growth

We forecast +3.3%/+2.7% EPS growth in FY25-26F to US$178mn/US$183mn, assuming FY25 electricity generation of 4,930GWh, +2.12% yoy, derived from the capacity addition from Lumut Balai, which increases the portion of electricity sales (vs. steam sales) and has a higher ASP of US$9.8 cents/KWh (vs. US$6.4 cents/KWh). Aside from Hululais, all future greenfield projects will be based on electricity sales, which we estimate will average c.US$9.8 cents for the first 10 years in operation, based on our calculation from PP No.112/2022.

Resuming coverage with a BUY rating and a TP of Rp1,200

We resume coverage on PGEO with a Buy rating on robust growth trajectory and attractive FY25F valuation of EV/EBITDA at 6.5x (vs. regional peers at 11.6x). Our TP of Rp1,200 is derived from a DCF valuation method on all existing projects (Kamojang, Lahendong, Ulubelu, Lumut Balai, Karaha). Our TP implies an EV/EBITDA of 8.2x/7.8x, while at current share price, PGEO’s valuation stands at 6.5x EV/EBITDA. Key risks to our view include 1) lower availability/capacity factor, and 2) delays in project timeline.

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