United Tractors (UNTR IJ)
A Cautiously Optimistic FY26 Outlook; A Slight Trim to our Estimates and TP
- UNTR sees soft outlook for coal price to continue in FY26, weighing down potential demand for Komatsu big size units.
- Despite temporarily constrained gold production in FY26, UNTR expects higher coal sales volume following completion of logistics expansion.
- We slightly trimmed our FY25-27F estimates and TP, but reiterate our Buy rating on intact FCF generation and upside from TSR initiatives.
Coal: Coal sales volume growth offset price and Pama’s softer outlook
UNTR mgmt. guides for a slightly lower FY25 sales outlook for Komatsu and mining contracting volume on the back of the softer coal price and unfavourable weather conditions. Mgmt. expects coal price to remain soft in FY26, hence potentially weighing on FY26 big-size unit demand, resulting in the FY26 target set at 4,300 units (though with upside risk from demand from non-mining sectors), while Pama’s OB removal is guided to see a modest growth. While mgmt. also hints on cost optimization in Pama’s operation, we believe weather condition remains a key risk for margin, while we expect impact from implementation of B50 to be fully passed on to customers. UNTR sees potentially higher sales volume from its own coal mine to 15.6Mt and to 18.8Mt (including third party volumes) in FY26.
Gold: Temporary restraint on FY26 production; shifting to domestic market
UNTR expects the Martabe mine to produce 230k oz in FY25, but decline to ~190k oz in FY26 due to limited tailing storage availability, as the new facility will only be completed in FY27. This will be partly offset by the production ramp up from the SJR mine to 25k oz in FY26. Mgmt. also indicates that Martabe sold 80-90% of its output to export market and aims to shift to domestic market following the planned implementation of export levies. On the nickel front, the management indicated that the RKEF smelter is slated for commercial production in 1H26, with FY26 output expected to be 12k tonnes.
FY25-26F estimates slightly trimmed
We slightly trimmed our FY25-26F estimates by 0.4-2.5%, taking into account the following: lower Komatsu unit sales, lower FY26 production growth for Pama (to 3% yoy, vs. 5% prev.), higher coal FY26 sales volume (18.8Mt vs. 15.6Mt prev.), lower FY26 gold production vol. of 220k oz (vs. 240k oz prev.).
Reiterate Buy rating with a slightly lower TP of Rp32,000
We maintain our Buy rating on UNTR on steady free cash flow generation and upside from the gold assets. Key risks are production misses from Pama and project execution risks. We slightly lowered our SOTP-based TP to Rp32,000 to reflect the above changes in estimates.
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