Our target price for Adaro of Rp4,000/sh is set at a mid-FY25E 5.9x EPS, at the stock's historical 4-year mean. While considering the company's strong balance sheet, we also take into account investors' ESG concerns regarding coal mining and potentially lower coal prices in 2024-26E.

Downside risks that could mean the Adaro stock fails to achieve our target price include: 1) lower-than-expected coal prices; 2) lower-than-expected coal production volumes; 3) higher-than-expected costs; and 4) slower-than-expected monetization of the company’s green projects. Conversely, if any of these risk factors proves to be better than expected, the stock could outperform our target price.