Coal Reforms And Global Shifts Will Shape Future Outlook

Key Takeaways

• Lower royalty rates and potential license extensions will improve profitability, operational certainty, and cost efficiency for the company.
  
• Continued Asian energy demand and Indonesia's export position support stable revenues and enhanced earnings resilience for Bumi Resources.
  
• Heavy reliance on thermal coal combined with slow diversification efforts and regulatory risks threaten Bumi Resources' long-term earnings and financial stability.

Catalysts

Engages in the mining activities in Indonesia.

• The reduction of coal royalties from approximately 28% to 18% starting in May is expected to directly boost EBITDA and net profit margins, as a significant portion of revenue previously allocated to royalties will now flow to the bottom line.
  
• Ongoing and anticipated license extensions tied to downstream coal projects (such as coal-to-gasification or methanol) could unlock longer-term operational certainty and cost optimization through renegotiated contractor contracts, benefitting both revenue visibility and cost structure.
  
• Persistent infrastructure growth and energy demand in Asia, particularly from emerging economies, underpins medium-term coal consumption and export volumes from Indonesia, supporting stable or rising revenues for Bumi Resources despite a softening near-term price environment.
  
• Indonesia's strategic importance as a major non-Western coal exporter, amid ongoing global energy insecurity and diversification away from traditional suppliers, positions Bumi to capture favorable export demand, potentially leading to pricing advantages and improved earnings resilience.
  
• The planned quasi-reorganization, if completed, will reset retained earnings and potentially enable dividend payments for the first time in years, improving total shareholder return prospects and market confidence, which may drive higher valuation multiples.

Bumi Resources Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bumi Resources's revenue will decrease by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.3% today to 10.1% in 3 years time.
• Analysts expect earnings to reach $133.0 million (and earnings per share of $0.0) by about July 2028, up from $17.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 40.0x on those 2028 earnings, down from 153.2x today. This future PE is greater than the current PE for the ID Oil and Gas industry at 8.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.23%, as per the Simply Wall St company report.

Bumi Resources Future Earnings Per Share Growth

Risks

• Global decarbonization initiatives and the accelerating shift toward renewable energy threaten to structurally reduce long-term demand for thermal coal, which could erode Bumi Resources' future revenues and earnings even if prices stabilize short-term.
  
• Persistent declines in coal prices year-over-year, as confirmed by falling realized prices from $75.8/ton in 2024 to $64.9/ton in 2025, may compress net margins and operational profitability despite efforts to control costs.
  
• Heavy dependence on coal, combined with uncertainty and delays in diversifying into downstream activities (like coal gasification or methanol), exposes Bumi Resources to long-term structural decline as global coal consumption wanes, directly endangering the stability of its revenue base.
  
• Implementation of new government regulations-such as extended required deposit periods for export revenues and higher fuel blend requirements (B40), both of which negatively impact working capital flexibility and drive up production/maintenance costs-could further reduce cash flows and net profit margins.
  
• Extension of key mining licenses, which are currently only secure until 2030/2031 and contingent upon unproven downstream diversification, introduces significant operational and financial risk that could undermine earnings visibility and investor confidence if not secured.

Valuation

• The analysts have a consensus price target of IDR165.15 for Bumi Resources based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $133.0 million, and it would be trading on a PE ratio of 40.0x, assuming you use a discount rate of 12.2%.
  
• Given the current share price of IDR119.0, the analyst price target of IDR165.15 is 27.9% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.