SSMS posted revenue of IDR11.01 trillion in FY25E (+5.33% YoY), supported by strong FFB productivity and optimization of processing capacity. Nucleus FFB production reached 1,723 thousand tons (95% of total 1,817 thousand tons of FFB produced), with a 4-year CAGR of 4.06%. The nucleus FFB yield stood at 25x (vs. blended yield of 22x in FY23).

SSMS operates eight palm oil mills (PKS) with an average capacity of 540 tons per hour or 3,200 tons per day. With a production CAGR of 2.03% (FY20-FY23), plant utilization remained at ~65% in FY23, processing 2,345 thousand tons of FFB, 76% sourced internally. Looking ahead, internal supply is projected to grow to 1,841 thousand tons in FY26F (CAGR 2020-2026E: 2.23%), increasing internal contribution to processed FFB to 80-81%, with mill utilization projected at 65-66% in FY25E/FY26F.

With high productivity and operational efficiency, we estimate CPO productivity to remain solid (CAGR 2020-2025F: 2.57%), supported by prime-phase tree age. The olein segment is expected to contribute significantly, with a sales volume CAGR of 2.17% (2021-2025F) and ASP estimated at IDR 13,400–IDR 13,500/kg in FY25F.

We initiate a BUY rating for SSMS with a target price of IDR2,375, based on a DCF valuation (WACC: 8.30%, terminal growth: 2.0%). The B35-to-B40 transition in 2025 is expected to drive higher domestic CPO consumption, further supporting SSMS’s growth. Additionally, its young tree age (Nucleus Only: 15-16 years, Blended: 14.8 years) enables optimal FFB production. The fully integrated upstream-to-downstream model adds value by allowing product diversification with higher margins. Key risks: 1) Global CPO price fluctuations; 2) Regulatory changes; 3) Rising operational costs impacting profitability.

By PHINTRACO SEKURITAS | Research
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