Indonesian Heavy Equipment Firms in Focus: United Tractors
Sales of United Tractors, the largest distributor of heavy equipment in Indonesia and part of the Astra Group, continue to climb in 2017. In fact, the management of United Tractors now expects full-year 2017 sales to exceed their initial forecast. Sara Loebis, Corporate Secretary of United Tractors, said the company has therefore raised its forecast for full-year heavy equipment unit sales from 3,000 to 3,200 units.
It is the second time United Tractors raised its forecast for full-year 2017 sales of heavy equipment. Its initial forecast was 2,700 units. In addition to the already positive performance so far in 2017, heavy equipment sales are expected to rise further in the remainder of the year, partly on the back of traditionally rising demand for heavy equipment in the second half of the year as well as the improving coal mining industry.
In the January-July 2017 period United Tractors sold 2,061 units of heavy equipment, achieving 64 percent of the company's new full-year target. Moreover, it constitutes a 70 percent year-on-year (y/y) growth from sales in the same period one year earlier.
Loebis attributed sales growth to high demand for Komatsu units amid improving conditions in the coal mining sector. Traditionally, the coal mining sector contributes most to sales of United Tractors, accounting for 51 percent of total sales. In fact, it is estimated that for each USD $5 coal price growth, the company's sales rise 4.3 percent.
This year United Tractors set aside USD $560 million for capital expenditure (capex), more than double from the USD $250 million that was set aside in last year's budget. In the first half of 2017 the company has already spent around 40 percent of its capex budget (most of which is used for mining contractors, such as replacing outdated equipment).
In the first half of 2017 United Tractor's sales rose 30.1 percent (y/y) to IDR 29.4 trillion (approx. USD $2.2 billion), supported by a surge in sales volume amid rising production and overburden removal in the coal mining sector. The average sales price of units also rose. Meanwhile, the company's net profit surged 78.9 percent (y/y) to IDR 3.4 trillion in H1-2017.
UOB Kay Hian recommends investors to buy shares of United Tractors and put its target for the company's shares at IDR 31,500 a piece, reflecting a price-to-earnings ratio (PER) of 14.2 times. On Friday (25/08) shares of United Tractors were down 1.64 percent to IDR 29,975 a piece at 11:50 am local Jakarta time. However, so far this year its shares have surged 41.1 percent.
Stock Quote United Tractors - UNTR:
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