AKR Corporindo (AKRA.IJ Rp 1,450; BUY TP Rp 1,700) Expect in line 3Q24E result and 4Q24E to remain as the strongest quarter

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AKR Corporindo (AKRA IJ)

Expect in line 3Q24E result and 4Q24E to remain as the strongest quarter

We estimate in line 3Q24E for AKRA (net profit at 63% of our FY24F vs 61%-72% seasonality), as petroleum and land sales may improve qoq.
We expect JIIPE land sales to be back-loaded in 4Q24E, similar to FY23 trend, thus 4Q24E net profit to come in strong at ~Rp1tr.
AKRA’s share price correction has priced in a soft 3Q24E; we upgrade our rating to BUY as we expect better performance ahead.

Expecting in line 3Q24E result with qoq improvement across segments

We expect AKRA to record Rp28.2tr in revenue in 9M24E (75%/69% of our/cons estimate, in line with 3-year seasonality of 67%-73%). We estimate 3Q24E revenue of Rp9.6tr (+8% qoq), on the back of: 1) More land sales to be recorded in 3Q24E (similar to last year's seasonality with 0 ha sales in 2Q23 vs 10 ha in 3Q23); 2) Recovery of national coal production by 2.4% qoq, which should boost petroleum distribution revenue. However, we still expect 9M24 to decline by 6% yoy due to the drag from weak 1H24 revenue. We estimate GP/EBIT/EBITDA margins to improve by 310bps/390bps/360bps qoq, as we expect a bigger miner contribution to the buyer profile for the petroleum business in 3Q24E. Our 9M24E/3Q24E net profit estimate is Rp1.7tr/Rp717bn (63%/62% of our/consensus estimate, in line with seasonality of 61%-72%).

4Q24E is expected to be strongest quarter, driven by JIIPE land sales

We expect AKRA to record another excellent quarter in 4Q24E, similar to 4Q23. We expect this to be mainly driven by back-loaded JIIPE land sales, as AKRA’s management is still confident in recording 100-130ha of land sales in FY24E with strong pipelines, including chemical companies (our estimate: 100ha, with 60-70ha sales in 4Q24E). Furthermore, we also expect the trading & distribution segment (petroleum and chemical) to continue its growth traction, as 51%-72% of annual revenue in this segment happens in 2H every year. We expect AKRA to record ~Rp1tr of net profit in 4Q24E (+41% qoq).

Upgrading our rating to BUY, as market has priced in 3Q expectation

We believe the correction in AKRA’s share price was due to the market pricing in a soft 3Q24E expectation. However, we expect better AKRA performance ahead due to a strong 4Q24E, with gradual growth in the logistics and utility segment. We upgrade our rating from Hold to Buy with an unchanged SOTP-based TP of Rp1,700. AKRA currently trades at an FY25E PE of 10x, on par with its 5-year average. Downside risks: 1) Petroleum revenue and margin stay at 1Q24/2Q24 levels; 2) Lower land sales.

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