XA Update Report | Indo Tambangraya Megah Tbk. (ITMG) – Looming Production Cuts Offset By Price Optimism
By Axell Ebenhaezer (Senior Research Analyst) & Kevin Pratama (Research Associate)
05-Mar-2026
ITMG reported a steep yet expected decline in FY25 net income to IDR 3.2 trillion (-49% YoY) as topline suffers (-18% YoY) due to ASP falling to USD 76/ton (-20% YoY). FY25 sales volume increased to 24.7 Mt (+3% YoY), despite missing initial guidance figures caused by soft demand from China. Production volume came in at 21.2 Mt for the year, in-line with guidance and increasing by 5% YoY, while strip ratio sits at 9.4x below guidance figure of 10.5x.
🔹 Production uncertainty haunts growth prospects
• The Ministry of Energy (ESDM) plans to cut domestic coal production by slashing FY26 RKAB quotas. This is an attempt by the government to alleviate oversupply and reduce downside price risk.
• Total domestic production possibly will be lowered to somewhere in the range of 600-700 million tons, significantly below FY25’s realized production of 790 million tons. Despite no formal figure yet announced, we suspect ITMG’s production to be drastically impacted by this significant policy shift.
• Our forecast for ITMG’s FY26 production volume stands at 16-17 million tons. We see this forcing the company to increase third party coal purchases, which will crunch overall profit margins
🔹 Rising tensions exacerbate energy concerns
• Disruptions to oil & gas supply lines due to escalating conflict in the Middle East has raised fears of a spike in energy prices. This is similar to how the start of the Russia-Ukraine war catapulted energy-related commodities to dizzying heights in 2022, with Newcastle coal prices reaching over USD 450/ton at one point.
• Coal futures have already jumped in the past week, but we are yet to see how long of an impact the current conflict will have on energy prices. Should coal prices continue trending up, we can expect higher ASP for ITMG’s seaborne coal, helping offset the impact of production issues on overall company performance.
🔹 Demand remains relatively steady but growth prospect limited
• Despite a 3% YoY growth in sales volume, the company’s failure to reach its initial target for FY25 reflects a plateauing coal market.
• The company’s export volume to China fell to 8.4 million tons in FY25 (-9% YoY) as slow Chinese industrial activity, strong domestic production and inventory level, as well as increasing renewable installed capacity has capped growth.
• A similar story can be seen with Japan, as despite the company’s export volume to the country remaining steady, strong demand growth is unlikely as the country continues to prioritize LNG and nuclear energy to meet national energy needs.
🔹 HOLD recommendation with a TP of IDR 23,750
• We give ITMG a HOLD rating with a TP of IDR 23,750. This implies a forward PE ration of 9.97x, slightly below the company’s 5-Yr SD+1 band.
• Risks: 1) Weak coal export market 2) RKAB uncertainty 3) Weather
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