Surya Esa Perkasa (ESSA IJ) (Buy) - Potential beneficiary during ammonia transition phase

Potential beneficiary during ammonia transition phase

Maintain Buy with an increased TP of IDR1,200

1Q26 results: Strong beat; sharp rise in ammonia prices sustaining elevated margins

1Q26 revenue of USD95mn (+1% q-q, +37% y-y) came in at 37%/31% of our/consensus estimates for FY26F, and net income of USD19mn (-1% q-q, +131% y-y) at 37%/35% of estimates. GPM rose to 46% (vs 32% in 1Q25) and NPM to 20% (vs 12% in 1Q25), driven by a 33% y-y rise in ammonia ASP to USD455/t amid Middle East tensions, while production rose 16% y-y to 195.5kt as plant utilization improved to 121% (vs 104% in 1Q25).

See upside risk to ammonia price during transition phase; US /China set to enter the market

Ammonia is entering a transition phase with April Middle East price at ~USD700/t (+40% YTD), as the conflict in the Middle East has removed ~20% of the merchant supply (~3.8Mtpa) indefinitely, according to Argus. We see continued near-term upside as Indian west-coast buyers scramble for replacement tonnes. Longer term, US Gulf Coast new capacity (GCA + Woodside Beaumont, ~2.3 Mtpa combined), commissioned since 2025, should establish the US as an emerging exporter, while Chinese new capacity in 2027 is poised to rebalance the market, in our view. Through this transitional phase, ESSA's ~4% global merchant share should be structurally advantageous – every 1% ammonia price increase will drive ~1.1% profit uplift, by our estimate.

Strong financial foundation to capture ammonia price tailwinds

We assume FY26F/27F ammonia price/ton at USD600/500 with the long-term price held flat despite US/China emerging new supply — justified by global cost-curve inflation and China's green ammonia cost premium flooring grey ammonia pricing. Operationally, we model: (1) 90% utilization for FY26F (40-day May maintenance); (2) conservatively higher gas floor cost post-2027F on the upcoming feedstock contract extension. Even on these conservative assumptions, ESSA should generate USD100-130mn FCF annually — well above its ~USD70mn 10-year average. This positions the company to support upcoming initiatives, including deleveraging, dividend, and/or growth ventures (blue ammonia investment).

Pure-play ammonia producer; maintain Buy with a higher TP of IDR1,200

We maintain our Buy recommendation with a new DCF-based TP of IDR1,200 (vs IDR625 previously), assuming an unchanged 13% WACC. We view ESSA as a pure-play ammonia producer, and we exclude its future projects from our valuation. Our higher TP is justified by our long-term ammonia assumption of USD500/t (vs USD400/t previously). ESSA trades at 10x FY26F P/E compared to the peer group average of 14x P/E. Downside risks include: (1) weak ammonia price, (2) lower plant utilization, and (3) execution on the blue ammonia project.

Year-end 31 Dec	FY25		FY26F		FY27F		FY28F
Currency (USD)	Actual	Old	New	Old	New	Old	New
Revenue (mn)	295	0	427	0	405	0	405
Reported net profit (mn)	40	0	84	0	76	0	61
Normalised net profit (mn)	40	0	84	0	76	0	61
FD normalised EPS	0.23c		0.49c		0.44c		0.35c
FD norm. EPS growth (%)	-10.8		109.5		-9.9		-20.1
FD normalised P/E (x)	23.5	–	10.9	–	12.1	–	15.1
EV/EBITDA (x)	8.2	–	4.2	–	4.0	–	4.1
Price/book (x)	2.1	–	1.8	–	1.6	–	1.5
Dividend yield (%)	1.3	–	2.8	–	2.5	–	2.0
ROE (%)	9.3		17.5		14.0		10.3
Net debt/equity (%)	net cash		net cash		net cash		net cash

Source: Company data, Verdhana estimates

Key data on Surya Esa Perkasa

Income statement (USDmn)
Year-end 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
Revenue	301	295	427	405	405
Cost of goods sold	-193	-196	-246	-233	-258
Gross profit	108	99	181	172	147
SG&A	-26	-28	-34	-36	-37
Employee share expense
Operating profit	82	71	146	136	111
EBITDA	129	117	193	183	157
Depreciation	-47	-47	-47	-47	-47
Amortisation
EBIT	82	71	146	136	111
Net interest expense	-5	0	3	-3	-5
Associates & JCEs
Other income	0	0	0	0	0
Earnings before tax	77	71	149	134	106
Income tax	-16	-16	-33	-29	-23
Net profit after tax	60	55	116	104	82
Minority interests	-15	-15	-32	-28	-22
Other items
Preferred dividends
Normalised NPAT	45	40	84	76	61
Extraordinary items
Reported NPAT	45	40	84	76	61
Dividends	-10	-12	-25	-23	-18
Transfer to reserves	35	28	59	53	43
Valuations and ratios
Reported P/E (x)	21.8	23.5	10.9	12.1	15.1
Normalised P/E (x)	21.8	23.5	10.9	12.1	15.1
FD normalised P/E (x)	21.8	23.5	10.9	12.1	15.1
Dividend yield (%)	1.0	1.3	2.8	2.5	2.0
Price/cashflow (x)	7.0	11.0	5.6	7.0	7.3
Price/book (x)	2.4	2.1	1.8	1.6	1.5
EV/EBITDA (x)	8.2	8.2	4.2	4.0	4.1
EV/EBIT (x)	12.9	13.5	5.6	5.4	5.9
Gross margin (%)	35.8	33.5	42.3	42.5	36.4
EBITDA margin (%)	42.7	39.8	45.2	45.1	38.8
EBIT margin (%)	27.2	24.0	34.3	33.6	27.3
Net margin (%)	15.0	13.7	19.8	18.8	15.0
Effective tax rate (%)	21.1	22.0	22.0	22.0	22.0
Dividend payout (%)	22.7	30.0	30.0	30.0	30.0
ROE (%)	11.4	9.3	17.5	14.0	10.3
ROA (pretax %)	14.5	13.4	28.5	28.0	24.8
Growth (%)
Revenue	-12.6	-2.1	44.8	-5.1	0.0
EBITDA	5.9	-8.7	64.4	-5.2	-14.1
Normalised EPS	36.0	-10.8	109.5	-9.9	-20.1
Normalised FDEPS	36.0	-10.8	109.5	-9.9	-20.1
Source: Company data, Verdhana estimates

Cashflow statement (USDmn)
Year-end 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
EBITDA	129	117	193	183	157
Change in working capital	17	-14	-8	-7	3
Other operating cashflow	-5	-17	-20	-44	-35
Cashflow from operations	141	86	165	132	126
Capital expenditure	-5	-2	-5	-4	-4
Free cashflow	136	84	160	128	122
Reduction in investments		0	0	0	0
Net acquisitions
Dec in other LT assets
Inc in other LT liabilities
Adjustments	0	-12	-16	3	0
CF after investing acts	136	72	144	131	122
Cash dividends
Equity issue	0	0	0	0	0
Debt issue	-69	-92	0	180	0
Convertible debt issue
Others	-8	-11	-12	-25	-23
CF from financial acts	-77	-104	-12	155	-23
Net cashflow	59	-32	132	285	99
Beginning cash	98	157	126	257	543
Ending cash	157	126	257	543	642
Ending net debt	-65	-126	-257	-363	-462
Balance sheet (USDmn)
As at 31 Dec	FY24	FY25	FY26F	FY27F	FY28F
Cash & equivalents	157	126	257	543	642
Marketable securities
Accounts receivable	22	31	38	40	38
Inventories	28	37	37	43	43
Other current assets	11	10	14	13	13
Total current assets	219	204	347	639	736
LT investments
Fixed assets	451	407	365	322	280
Goodwill
Other intangible assets
Other LT assets	24	36	52	49	49
Total assets	694	647	764	1,010	1,065
Short-term debt	76	0	0	0	0
Accounts payable	12	13	17	16	17
Other current liabilities	4	6	6	6	6
Total current liabilities	93	19	23	22	23
Long-term debt	16	0	0	180	180
Convertible debt
Other LT liabilities	31	44	63	60	60
Total liabilities	140	63	86	262	263
Minority interest	137	137	159	179	194
Preferred stock
Common stock	145	145	145	145	145
Retained earnings	272	302	374	425	463
Proposed dividends
Other equity and reserves
Total shareholders' equity	417	447	519	570	608
Total equity & liabilities	694	647	764	1,010	1,065
Liquidity (x)
Current ratio	2.36	10.55	15.40	29.54	32.15
Interest cover	15.2	571.0	–	50.2	22.3
Leverage
Net debt/EBITDA (x)	net cash	net cash	net cash	net cash	net cash
Net debt/equity (%)	net cash	net cash	net cash	net cash	net cash
Per share
Reported EPS (USD)	0.26c	0.23c	0.49c	0.44c	0.35c
Norm EPS (USD)	0.26c	0.23c	0.49c	0.44c	0.35c
FD norm EPS (USD)	0.26c	0.23c	0.49c	0.44c	0.35c
BVPS (USD)	0.02	0.03	0.03	0.03	0.04
DPS (USD)	0.00	0.00	0.00	0.00	0.00
Activity (days)
Days receivable	36.2	32.8	29.6	34.9	34.9
Days inventory	50.3	61.0	55.0	62.7	60.6
Days payable	24.3	23.6	21.9	25.4	23.1
Cash cycle	62.1	70.2	62.8	72.2	72.4
Source: Company data, Verdhana estimates

Company profileESSA Industries Indonesia (priorly Surya Esa Perkasa) is a publicly listed company operating in the chemicals and energy sector through its ammonia plant and also LPG refinery.

Valuation MethodologyOur target price of IDR1,200 is based on a DCF analysis, with WACC of 13%. The benchmark index is JCI.

Risks that may impede the achievement of the target priceDownside risks include to our call are 1) weak ammonia price, 2) lower plant utilization and 3) execution on blue ammonia project.

ESGESSA has put ESG aspect as the priority. The business operations of ESSA is related to good health and well-being, quality education, affordable and clean energy, decent work and economic growth, responsible consumption and production, and life on land, and ESSA has minimized global impact via its KBR Purifier Plus Technology and also its commitment through Blue Ammonia. ESSA has grown its values to the communities by giving donation and also scholarship, while at the same time prioritizing safety workplace in accordance to the IFC's high standard in healthy and safety.

Fig. 1: ESSA 1Q26 results

Source: Company data, Verdhana research

Fig. 2: ESSA quarterly financials trend

Source: Company data, Verdhana research

Fig. 3: ESSA revenue contribution

Source: Company data, Verdhana estimates

Fig. 4: ESSA net gearing

Source: Company data, Verdhana estimates

Fig. 5: Peers valuation

Source: Bloomberg Finance L.P., Company data, Verdhana estimates

Fig. 6: ESSA earnings sensitivity

Source: Company data, Verdhana estimates

Fig. 7: ESSA assumptions summary

Assumptions	Unit	ESSA
Assumptions	Unit	FY25	FY26F	FY27F
Sales volume	k tonnes	748.3	651.4	738.2

Ammonia index	USD/tonne	330	600	500

Ammonia ASP	USD/tonne	341	600	500

Revenue	USD mn	295	427	405

Cost of revenue	USD mn	196	246	233

EBITDA	USD mn	117	193	183

Net profit	USD mn	40	84	76

Source: Company data, Verdhana estimates

Fig. 8: A comparative overview of fertilizer supply crises in 2022 and 2026

Dimension

2022 Russia-Ukraine Crisis

2026 Middle East Disruption

Primary Supply Removed

Russian exports halted via the Togliatti pipeline

Gulf and Strait of Hormuz exports disrupted (~4.0–4.2 Mt annually)

Peak Price Recorded

Approximately USD1,600 per tonne at its highest

Still unfolding; currently around $650–$750/tonne and climbing as of mid-March

Market Preparedness

Largely caught off guard — markets had little readiness

Moderately prepared; domestic US production capacity has grown since 2022

Urea Market Impact

Severe disruption to global urea availability

Considerable impact with roughly 21% of seaborne urea trade at risk

Food Security Risk

Widespread global food security concerns

Elevated risk concentrated in India, Africa, and the Asia-Pacific region

Prior Supply Context

An isolated shock in an otherwise stable global fertilizer market

The third major supply disruption since 2022, in an already strained market

Source: Argus, Company data, Verdhana research

Fig. 9: ESSA share price vs ammonia price

Source: Bloomberg Finance L.P., Company data, Verdhana research

Fig. 10: Middle East ammonia price vs urea price

Source: Bloomberg Finance L.P., Company data, Verdhana research

Fig. 11: Ammonia-gas spread widens

Source: Bloomberg Finance L.P., Company data, Verdhana research

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general.

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.

This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

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Rating Table

Rating Remains	Buy
Target price Increased from IDR 625	IDR 1,200
Closing price 6 May 2026	IDR 905
Implied upside	+32.6%
Market Cap (USD mn)	897.0
ADT (USD mn)	7.3

Relative performance chart

Source: LSEG, Verdhana

M cap (USDmn)	897.0
Free float (%)	28.5
3-mth ADT (USDmn)	7.3

(%)	1M	3M	12M
Absolute (IDR)	36.1	48.4	40.3
Absolute (USD)	33.3	43.9	32.8
Rel to Jakarta Stock Exchange Composite Index	35.1	59.4	38.0

Research Analysts

Michael Wildon Ng (michael.wildon@verdhana.id)
Nizam Syafik (nizam.syafik@verdhana.id)

Tags: OIL AND GAS CHEMICALS ASIA, Surya Esa Perkasa, ESSA, ESSA JK, ESSA IJ, Michael Wildon Ng, Nizam Syafik

Surya Esa Perkasa (ESSA IJ) (Buy) - Potential beneficiary during ammonia transition phase

Potential beneficiary during ammonia transition phase

Key data on Surya Esa Perkasa

Fig. 1: ESSA 1Q26 results

Fig. 2: ESSA quarterly financials trend

Fig. 3: ESSA revenue contribution

Fig. 4: ESSA net gearing

Fig. 5: Peers valuation

Fig. 6: ESSA earnings sensitivity

Fig. 7: ESSA assumptions summary

Fig. 8: A comparative overview of fertilizer supply crises in 2022 and 2026

Fig. 9: ESSA share price vs ammonia price

Fig. 10: Middle East ammonia price vs urea price

Fig. 11: Ammonia-gas spread widens

Rating Table

Relative performance chart

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Surya Esa Perkasa (ESSA IJ) (Buy) - Potential beneficiary during ammonia transition phase

Fig. 1: ESSA 1Q26 results

Fig. 2: ESSA quarterly financials trend

Fig. 3: ESSA revenue contribution

Fig. 4: ESSA net gearing

Fig. 5: Peers valuation

Fig. 6: ESSA earnings sensitivity

Fig. 7: ESSA assumptions summary

Fig. 8: A comparative overview of fertilizer supply crises in 2022 and 2026

Fig. 9: ESSA share price vs ammonia price

Fig. 10: Middle East ammonia price vs urea price

Fig. 11: Ammonia-gas spread widens

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