United Tractors (UNTR IJ)

FY26: A Transition Year; Estimates and TP Cut Post 1Q26 Miss, Shareholder Return Intact

• UNTR 1Q26 earnings miss reflects one-offs but also a weak underlying operating result due to RKAB and Martabe uncertainty.
• Mgmt guidance cut implies slower recovery, with pressure from RKAB uncertainty, lower Pama OB, and delayed Martabe ramp-up.
• Maintain Buy with lower TP of Rp30.6k, as we cut FY26-28F est. by 4.9%-44.1%; intact FCF to support dividend payout and buybacks.

1Q26 miss: operational weakness beyond the one-offs

Key takeaways from 1Q26 earnings and the management call are: 1) headline 1Q26 earnings were distorted by one-off charges, but the underlying operating result was also weak amid uncertain operating conditions. UNTR reported 1Q26 net profit of Rp643bn, down 80% yoy, forming only 4% of ours and consensus FY26F. 2) Mgmt revised conservative guidance points to FY26 as a transition year, with risk concentrated in Pama and TTA (both linked to RKAB revision), and Martabe’s production ramp-up. 3) Martabe production expected to restart around late May or early Jun26, although full normalization still depends on RKAB issuance, sales system approval, and land clearance for the tailings facility. 4) Upside risk could come from successful RKAB relaxation in 2H26, faster Martabe ramp-up.

Lowering our FY26 base case; expect FY27 recovery

Management revised Komatsu sales guidance to 4,000 units, down 11% yoy, with big-sized equipment sales expected to fall 44% yoy to 600 units. Pama’s OB guidance was cut to 900mn bcm, down 17% yoy, with the RKAB impact expected to be more visible in 2H26. For own coal mining, TTA’s approved RKAB is currently only 7.5Mt vs. original 15Mt target, while gold sales guidance now stands at 82k oz, comprising 60k oz from Martabe and 22k oz from SJR. Following the management call, we cut our FY26 operating assumptions to reflect slower Komatsu sales, but assume a slightly more positive outlook for Pama at 935mn bcm, TTA coal sales of 12.7Mt to account for possible RKAB revision, and gold sales of 85k oz. We expect 2027 growth to recover on the back of Martabe normalization, potential recovery in TTA volumes, and contribution from Stargate nickel.

Maintain Buy rating with lower TP of Rp30,600; cash return story intact

We lower our FY26-28F earnings forecast by 4.9-44.1% and our SOTP-based TP to Rp30.6k from Rp32k. We maintain our Buy rating, as we believe the share price has partly reflected the operational uncertainty, while UNTR’s FCF generation remains supportive of shareholder returns (dividend yield of 5.1%) and continuation of share buyback programs. Key risks are disappointment in RKAB revision and delays in Martabe restart.

… Read More 20260505 UNTR