XA Update Report | Alamtri Resources Indonesia Tbk. (ADRO) – Earnings Surge As Smelter Ramp Up Continues

 

 

By Axell Ebenhaezer (Senior Research Analyst)

15-June-2026

 

 

ADRO reported the strongest quarterly earnings since its post-AADI spin-off repositioning, with 1Q26 net income USD 128.1 million (+67.1% YoY from USD 76.7 million in 1Q25). The results significantly outperformed the depressed 1Q25 base and reflect genuine fundamental improvement — not merely a low-base effect — as multiple positive forces converged simultaneously: higher ADMR sales volumes, partially recovering met coal ASP, operational cost discipline at SIS, and a meaningful USD 25.3 million contribution from joint venture profits, likely reflecting improved earnings at associated entities.

 

 

 

🔹 Revenue climbs as margins improve in-light of efficiency initiatives

 

• Revenue grew 23.4% YoY to USD 470.9 million, with gross margin rising from 28.9% to 37.9%. Operating income jumped even more strongly at 85.1% YoY to USD 141.6 million, reflecting significant operating leverage as fixed costs were spread over a materially higher revenue base.

 

 

• The margin recovery is central to the investment thesis, as higher margins across the board confirms that the costefficiency initiatives implemented across ADMR and SIS in 2025 are bearing fruit.

 

 

• ADMR benefited from a combination of higher sales, improved met coal ASPs, & declining cash costs per ton as overburden stripping ratios normalized. SIS benefited from long-term service agreements providing stable, contracted revenue streams with affiliated parties covering equipment rental, overburden removal, coal extraction, and fuel transportation — spanning 10 to 33 years — providing strong earnings visibility.

 

 

🔹 Coal prices stabilize as aluminum production ramps up

 

• ADMR’s performance was the primary earnings engine in 1Q26. With its ‘Enviromet’ brand coal prized for its low-ash, low-phosphorus, high-vitrinite characteristics — properties that make it an ideal blending component for coking ovens globally — ADRO’s coal sales volumes continued to grow YoY, consistent with the 12% fullyear volume increase in FY2025.

 

 

• We forecast FY2026 coal sales of 7.0 Mt (+11.5% YoY) and 7.5 Mt in FY2027

 

 

• ASP trends, while still below the commodity cycle peaks of 2022, have shown early signs of stabilization and partial recovery after the severe -25% decline in FY2025 driven by stagnating steel demand in China and limited met coal import activity from India during the quota restriction period.

 

 

• India’s December 2025 reversal of quantitative restrictions on low-ash met coke imports — replaced by import levies — represents an important structural positive for ADMR, as Indonesia benefits from cost-competitive proximity to the world’s fastest-growing steel market. SIS’s service volumes remain robust, supported by longterm contracted agreements and growing third-party client demand.

 

 

• ADRO’s KAI smelter is also on track to reach full production by end of FY26, maximizing its 500ktpa capacity.

 

 

• We forecast aluminum prices to reach USD 3,600–3,800/ton by end-2026, supported by structural supplydemand imbalances: renewable energy capacity buildout, expanding construction & transport sectors, and the progressive retirement of aging, energy-inefficient Western smelting capacity.

 

 

• For ADRO specifically, KAI aluminum revenue is expected to begin contributing meaningfully in Q4 2026, with positive net profit contribution from 2027 onwards.

 

 

 

🔹 BUY recommendation with a TP of IDR 3,250

 

• P/E-based target: We estimate ADRO’s FY2026 net income attributable to the parent at USD 605 million (EPS: IDR ~370/share), representing a 35.2% year-on-year recovery from FY2025’s USD 448 million. This incorporates: (a) ADMR coal earnings recovery on volume growth and partial ASP improvement; (b) SIS revenue expansion; and (c) still-modest KAI contribution given the ramp-up phase, partially offset by capitalized interest expenses. At our 12-month target price of IDR 3,250, ADRO would trade at approximately 8.77x our FY2026E earnings — in line with the company’s historical post-spinoff fair-value trading range of 7-9x and a modest discount to the April 2026 NH Korindo TP of IDR 3,400 (9.82x), reflecting current macro risks and conservative outlook on Indonesian equity market.

 

 

• SOTP components: (1) ADMR 85.5% stake: ADMR is separately listed and we value ADRO’s stake based on ADMR’s market value, discounted 20% for holding company structure; (2) SIS at 6-8x forward EBITDA, reflecting steady contracted cash flows; (3) KAI at 0.5 – 0.8x Phase-1 project NPV given construction-phase uncertainty & execution risk, rising to full value as commissioning completes; (4) AADI 15.4% stake at current market value, discounted 20% for holding company structure. Our blended SOTP yields an implied range of IDR 3,150–4,000 per share, with our base case of IDR 3,250 representing a conservative 9% discount to the SOTP midpoint to account for holding company discount and execution risk on the aluminum smelter.

 

 

• Risks: 1) Mining regulatory changes 2) Smelter execution risk 3) Coal price volatility

 

 

 

 

Download full report HERE.

 

 

 

 

NH Korindo Sekuritas Indonesia berizin dan diawasi Otoritas Jasa Keuangan (OJK). Untuk informasi lebih lanjut, anda dapat menghubuni CS kami via email CSO@nhsec.co.id