JPMorgan's Downgrade of Adaro Energy#
JPMorgan has recently downgraded the stock rating of Adaro Energy Tbk PT (ADRO:IJ) from Overweight to Neutral. Alongside this change, the firm has raised its price target for the stock to IDR 2,600.00, up from IDR 2,540.00.
Reasons for the Downgrade#
The downgrade comes as JPMorgan looks to book profits after Adaro Energy's impressive performance this year. The stock has outperformed the Jakarta Composite Index (JCI) by more than 50% year-to-date, delivering a 42% return and trading near its 52-week high. This strong performance is attributed to several factors, including a reduced discount in its valuation and higher coal prices.
Share Buyback and Dividends#
Adaro Energy has also announced a share buyback program worth Rp 4 trillion over the next 12 months, which represents about a 5% buyback yield. Additionally, the company recently declared a final dividend of $197.5 million, translating to a yield of approximately 5%. This brings the total expected dividend payout for 2025 to around $450 million, equating to 100% of its earnings.
Shift in Focus#
With the realization of its investment thesis for Adaro Energy, JPMorgan is now shifting its focus to another company, ADMR, which has an Overweight rating. This change reflects a preference for direct exposure to ADMR's high-cash generating aluminum business.