Samuel Sekuritas initiated the shares of PT Alkindo Naratama Tbk (ALDO) with a buy rating. Meanwhile, the target price for this issuer of paper producers is Rp. 2,000 per share. Samuel Sekuritas analyst Farras Farhan in his research on February 7, 2021, wrote that, prospectively, ALDO has promising performance growth potential. This issuer, which provides papercore products that are used as bobbins for the textile industry, also has a fairly diverse business diversification. In addition to focusing on the textile industry, ALDO also has a chemical distribution and polymer sales business unit.

Not only that, ALDO is also expanding into the packaging sector from recycled cardboard, with flexible packaging and brown paper products.

In 2019, ALDO has also acquired Eco Paper Indonesia with the aim of increasing the brown paper business.

Farras assessed that one of the factors that will drive ALDO's performance growth in the future is the expansion of Eco. Meanwhile, this year ALDO has budgeted a capex of Rp 370 billion for the expansion of Eco Paper Indonesia in line with the increasing demand for eco packaging from the FMCG industry, especially the F&B and e-commerce sectors.

Later, through this expansion, ALDO will increase its production capacity to 150,000 tons which is projected to be completed in the fourth quarter of 2022.

"We estimate that it will take some time before all new facilities from this expansion can be fully utilized, and the company's utilization rate will increase gradually until 2024," Farras wrote in his research.

Through this additional capacity, Farras believes that ALDO has the potential to generate revenue of Rp. 1.6 trillion in 2022, of which 47% (Rp. 739 billion) will come from Eco Paper Indonesia.

In addition, he also sees ALDO can maintain the effectiveness and stability of the margin for this year. Farras projects ALDI's GPM and OPM at 22% and 11%, respectively. Overall, he assessed that ALDO could print a net profit of Rp. 73 billion this year.

Apart from expansion, one of the positive catalysts that can boost ALDO's performance is the momentum of economic recovery. Farras said the economic recovery would increase demand for textile chemicals.

Therefore, he projects that ALDO's chemical distribution volume will increase by 7% yoy to 3,144 tons in 2022 and continue to grow.

However, the expansion action will make ALDO's debt portion in 2022 bigger than the company's equity. Based on his calculations, the DER ALDO will be around 0.52x.

"However, with the expansion already underway, we see that this DER portion will decrease in the following years, and the solvency of ALDO will be healthier," he concluded.