UBS: Indonesia’s energy and industrial sectors need to manage policy and geopolitical risks, with ADMR as the top pick

Overview

This report focuses on Indonesia’s energy and industrial sectors, discussing the impact of oil price shocks, Strait of Hormuz-related geopolitical risk, coal quotas and potential taxes, aluminum prices, and smelter project returns on major listed companies. UBS believes the opportunity set in the sector is highly differentiated: rising oil prices are positive for MEDC, AKRA, and some refining-related exposures but unfavorable for PGAS’s natural gas distribution costs and margins; in coal, fiscal pressure on the government may push approval of additional mining quotas, but uncertainty remains around new export taxes, windfall taxes, and cost-recovery mechanisms.

Core views

The core views are: first, a roughly US$20/bbl increase in Brent oil prices will materially change earnings sensitivity for oil and gas, fuel distributors, and natural gas companies; second, the Indonesian government may approve more coal quotas in the second half of 2026, but may also raise fiscal revenue through export taxes, windfall taxes, or a sharing mechanism, and UBS’s model already incorporates about a 5% coal export tax; third, downside risk to ADMR’s mining quota has been partly priced into the stock, while its aluminum business and elevated aluminum prices are not yet fully reflected; fourth, spot aluminum prices are about US$3.5k/t, above UBS’s 2026E base-case assumption of US$3.3k/t, and if measured at spot pricing ADMR’s smelting project payback period at the EBITDA level is about 2.5 years.

Analysis framework

The report combines scenario analysis, earnings sensitivity, peer valuation comparison, commodity price assumptions, and project return calculations. In the oil segment it compares different Brent price scenarios and forward-curve shifts, and assesses the impact on earnings and margins for MEDC, AKRA, BRPT, and PGAS. The coal segment combines quota policy, fiscal deficit, coal export data, and potential tax mechanisms. For ADMR, it further models the sensitivity of coking coal volume, ASP, aluminum volume, and aluminum prices to EPS and share price.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  The report discloses that UBS’s valuation approach for the Indonesian energy sector includes an SOTP model, which values each business and asset separately and then sums them.

• Sensitivity analysisCommodity price sensitivity

  Commodity price sensitivity

  The report evaluates the impact of changes in Brent oil prices, coking coal prices, aluminum prices, and sales volumes on company EPS, EBITDA, and share price.

• Scenario analysisBrent oil price scenarios

  Brent oil price scenarios

  2026E Brent scenarios range from around US$78/bbl to US$132.5/bbl, 2027E from around US$75/bbl to US$100/bbl, and 2028E is US$75/bbl in most scenarios, with the highest scenario at US$85/bbl.

• Relative valuationPeer valuation

  Peer valuation comparison

  The report compares Indonesian coal, metals, oil and gas, renewable energy, and pulp-and-paper peers on metrics such as P/E, EV/EBITDA, dividend yield, and market value.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ADMR.JK / Alamtri Minerals

  Top pick, rated Buy(CBE)

  Strengths

  Could receive additional mining quotas, aluminum sales start contributing from Q2 2026, aluminum spot prices are above base-case assumptions, short smelter-project payback period, and potential increase in dividend payout ratio.

  Weaknesses

  Current coking coal quota of 4.3 million tons is below UBS’s original estimate of 6.5 million tons, and coking coal volume and ASP still affect EPS.

  Comparison

  Ranks first in UBS sector ranking, ahead of MEDC, AKRA, ADRO, ITMG, BRPT, PGAS, and PTBA.

  Risks

  Quota revision may fall short of expectations, coking coal prices may decline, aluminum prices may fall, and project execution may underperform.

• MEDC.JK / PT Medco Energi Internasional Tbk

  Oil-price upside beneficiary, rated Buy

  Strengths

  About 50% of production is linked to oil prices, and rising Brent oil has high positive EPS sensitivity.

  Weaknesses

  Earnings are still affected by oil and gas prices and exploration and production performance.

  Comparison

  Ranks second in UBS sector ranking, behind ADMR.

  Risks

  Oil prices below expectations, exploration miss, execution risk, and regulatory changes.

• AKRA.JK / AKR Corporindo

  Beneficiary of tight fuel markets, rated Buy

  Strengths

  B2B fuel margins are supported in a tight market, and NPAT guidance of about 15% year-on-year growth may still have room to rise.

  Weaknesses

  Margins and profitability have lagged correlation with oil prices and distribution gross profit; if market tightness eases, margins may weaken.

  Comparison

  Ranks third in UBS sector ranking.

  Risks

  Oil prices retreat, distribution margins compress, and demand weakness.

• BRPT.JK / Barito Pacific

  Positive beneficiary of higher oil prices and refining margins, but rated Neutral(CBE)

  Strengths

  Recorded a record quarter in 1Q26 on exceptionally high refining margins, and 2Q as well as potential 2H margins may remain elevated.

  Weaknesses

  Valuation is relatively high, with the table showing 2026E P/E of 44.4x and 2026E EV/EBITDA of 14.2x.

  Comparison

  In UBS ranking, it sits ahead of PGAS and behind ITMG.

  Risks

  Refining margin decline, petrochemicals volatility, and carbon tax impacts.

• PGAS.JK / Perusahaan Gas Negara

  Negative impact from higher oil prices, rated Neutral

  Strengths

  Has a natural gas distribution business and a relatively high dividend yield, with the table showing a 2026E dividend yield of about 7.0%.

  Weaknesses

  Higher oil prices lift LNG costs, which may reduce natural gas distribution volumes and margins.

  Comparison

  Ranks lower in UBS ranking, only above PTBA.

  Risks

  Rising LNG costs, deteriorating sales mix, and counterparty risks related to regulators and the power sector.

• AMMN.JK / Amman Mineral Internasional

  Copper-related metals stock, rated Buy(CBE)

  Strengths

  Charts show AMMN’s EV/EBITDA premium versus global copper peers has normalized, and the latest valuation is near the consensus level of peers.

  Weaknesses

  Still exposed to copper prices, project execution, and valuation swings.

  Comparison

  A larger company by market value within the metals segment; the table shows a target price of 8,800 and current price of 4,640.

  Risks

  Copper price decline, delayed project progress, and valuation compression in the market.

Key data

• Brent oil price upside shockUS$20/bblThe report assesses the impact of an about US$20/bbl Brent oil price move on Indonesian energy stocks.
• MEDC oil exposureabout 50% of production linked to oil pricesUBS estimates that under the 2026E Brent US$86/bbl assumption, MEDC EPS has about 45% upside versus the base case.
• Coal base production target600 million tonsThe Indonesian government has shown signs of possibly approving quotas above the original target.
• ICI 3-4 coal price performance+25%-30% YTDThe coal price rise may prompt the government to approve more quotas to raise revenue.
• Coal export tax model assumptionabout 5%UBS has included about a 5% export tax in its coal mining company models.
• ADMR awarded coking coal quota4.3 million tonsThis is below UBS’s original estimate of 6.5 million tons, but the report expects higher quotas to be possible once the revision window opens.
• Aluminium spot priceabout US$3.5k/t, +22% YTDThis is above UBS’s 2026E base-case assumption of US$3.3k/t.
• ADMR smelting project payback periodabout 2.5 yearsAt spot aluminum pricing, the EBITDA payback period is about 2.5 years.
• ADMR target price2,500The table shows current ADMR.JK price of 1,870, target price 2,500, rating Buy(CBE).
• MEDC target price2,570The table shows current MEDC.JK price of 1,585, target price 2,570, rating Buy.

Impact & implications

The investment implication is that the Indonesian energy and industrial sectors should not be judged by a single commodity direction; one should distinguish transmission channels across oil prices, coal prices, policy and taxes, project execution, and different business models. Rising oil prices are more constructive for upstream oil and gas and fuel distributors, while net negative for natural gas distributors on the cost side; relaxed coal quotas can support volumes, but additional fiscal charges will reduce profit elasticity; strong aluminum prices may allow ADMR’s non-coal contributions to be recognized sooner and improve market valuation perception.

Risks

• Coal and oil prices below expectations.
• Adverse changes in mining, oil and gas, and renewable-energy regulations.
• Project execution risk.
• Oil and gas exploration miss.
• Global coal and oil demand exits faster than expected.
• Tighter ESG requirements from lenders or investors reducing financing availability.
• Implementation of a carbon tax.
• Future renewable-energy project power prices below expectations.
• Excess electricity supply.
• PLN counterparty risk.
• Uncertainty over the pace of new export taxes, windfall taxes, or cost-recovery mechanisms.

What to watch

• Whether the Indonesian government approves coal quotas above the original 600 million ton target in the second half of 2026.
• Whether ADMR receives additional mining quotas in Q3 and whether aluminum sales start contributing from Q2 2026.
• Whether Brent oil prices and the forward curve remain above assumptions from March and April.
• Whether AKRA’s B2B fuel margin and NPAT guidance continue to be revised upward.
• PGAS’s LNG costs, distribution volumes, and spread movement.
• The speed at which the Indonesian government advances coal-export taxes, windfall taxes, cost-recovery, or gross split mechanisms.
• Whether aluminum prices remain around US$3.5k/t or stay above UBS’s 2026E base-case assumption.
• The impact of Hormuz Strait oil and gas transport-related geopolitical risk on Asian energy supply and oil prices.