Our target price for Alamtri Minerals Indonesia is based on a sum-of-the-parts (SOTP) valuation that utilizes discounted cash flow (DCF) methodology for the various business units. Our SOTP indicates a fair value for ADMR of Rp1,500/share (equivalent to 9.5x/4x 2026E PER & EV/EBITDA), with its metallurgical coal business making the largest contribution (80% of SOTP), followed by its aluminium business (15% of SOTP). Our DCF assumptions utilize a WACC of 10.4%-11.9% (Rf of 4.5%, beta of 1.1-1.3, net kd of 3.9% and ke of 13.9%-16.9), and long-term metallurgical coal/ aluminium prices of US$200/t and US$3,000/t respectively.

Key downside risks that could prevent the shares from reaching our target price include: 1) fluctuations in prices of metallurgical coal and aluminium prices amid supply and demand dynamics; 2) exploration risks on its metallurgical quality and reserves; 3) rising costs of production or capex; 4) logistics headwinds amid weather challenges; 5) regulatory and tax risks; and 6) operational and environmental risks. Conversely, if any of these risk factors proves to be better than expected, the stock could outperform our TP.