United Tractors (UNTR.IJ Rp29,775; BUY TP Rp33,000) Retaining Strong FCF Generation Despite Challenging Operational Outlook

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United Tractors (UNTR IJ)

Retaining Strong FCF Generation Despite Challenging Operational Outlook

Martabe gold mine operational halt and potential coal RKAB cut present uncertainties for UNTR in FY26.
Higher coal and gold prices offset earnings impact from lower production vol; we raise our FY26-27 forecast by 8.4%-22.6%.
Reiterate Buy rating with a higher TP of Rp33,000, as intact FCF generation supports better shareholder returns.

FY26 challenges from Martabe and RKAB cut uncertainties

UNTR enters FY26 facing uncertainties from the Martabe gold mine operational halt and the potential reduction in coal RKAB, which may affect both mining contracting volumes and production at its own mine (TTA). Management indicated that discussions with authorities on Martabe are ongoing, with operations potentially restarting within 1-2 months pending approval and RKAB issuance. Pama is currently operating at full capacity but was affected by heavy rainfall in Feb26, while the impact of potential RKAB cuts from clients is expected to materialize from Apr26 onward. Management expects the impact to be partially mitigated as around 50% of Pama’s revenue comes from clients with IUPK licenses, which carry lower risk of RKAB cut. The company also plans to apply for an RKAB revision for its own coal mine in 2Q26.

Earnings to be supported by upside from gold and coal price

We have adjusted our gold production assumption to 120k oz (from 204k prev.) to account for Martabe’s current operational halt (assuming production to restart in 2H26) and coal production for UNTR own mines to 14.8Mt (from 18.2Mt prev.) and Pama’s OB/ Coal to 935mbcm/ 125Mt (from 1.3bn/141Mt prev.) to account for the RKAB cut. Despite this, we expect FY26 earnings to be supported by the higher gold and coal price (US$4,900 and US$130/t, respectively), as we see positive impact from the energy supply disruption amid Middle East conflict to benefit coal (see our Coal sector report).

Reiterate Buy rating with a higher TP of Rp33,000

We expect UNTR’s strong FCF generation to remain intact at around Rp34.7tr in FY26, supporting management’s commitment to shareholder returns, as reflected in the Rp4tr share buyback program in 4Q25-1H26. Potential upside in gold and coal prices should help cushion operational risks in FY26. UNTR currently trades at 6.2x PE 2026F (+1.1 SD to 5-year mean) and we expect earnings to recover in FY26 and improve further in FY27, supported by operational normalization and contribution from the Stargate nickel smelter. We maintain our Buy rating with a higher TP of Rp33,000. Key risks include potential Martabe operation revocation, lower coal RKAB approval, and weaker coal and gold prices.

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