VALUATION OF KUJANG 1A PLANT USING DISCOUNTED CASH FLOW

• Main Author: Risdiana, Dian
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/46301
• Institution: Institut Teknologi Bandung

Pupuk Kujang is a subsidiary of Pupuk Indonesia Holding Company (Persero), its main business activities are in the field of fertilizer and petrochemical derivatives. Pupuk Kujang has a dual function, which is to distribute subsidized fertilizer through Public Service Obligation (PSO), and also sell non-subsidized products. The company's revenue is mostly derived from subsidized fertilizers, but there is a government plan to change the subsidy policy from indirect subsidies through fertilizer producers to direct subsidies to farmers, this makes companies must be able to compete in non-subsidized fertilizers market. The problem faced by Pupuk Kujang in competing in the non-subsidized market is the high cost of production, one of which is due to an old and inefficient factory, namely the K1A Plant. This research aims to help Pupuk Kujang in conducting financial assessments of K1A plant if a change in subsidy policy is implemented. This research begins by identifying business issues, that is the option to close the K1A plant. Then analyze the business situation using performance analysis and external and internal analysis. The external analysis uses PESTEL and porter five forces, while internal analysis uses SWOT. The next step is to carry out a valuation using discounted cash flow with the operating cash flow approach to generate NPV from the K1A plant. Operating cash flow is calculated by making financial projections for the next 10 years from 2019 to 2029. Projected cash inflows and cash outflows are discounted using the Weight Average Cost of Capital (WACC). In the WACC calculation, the cost of equity uses the Capital Asset Pricing Model (CAPM) and the cost of debt uses the bond yields of PT Pupuk Indonesia (Persero). The cost of equity is obtained at 17.9% and the cost of debt at 7.9%. With a debt ratio of 28.39% and an equity ratio of 71.61%, a WACC of 14.5% is generated. The final result of this valuation is that the K1A plant gets a negative NPV of - Rp 191,755,554,497, so the option to close the plant if a change in subsidy policy is implemented will make Pupuk Kujang's financial performance better. In this research, sensitivity analysis is carried out to find out which variables most influence the NPV value. By using crystal ball software, four variables are found that affect the NPV value, namely selling price, gas price, consumption ratio, and exchange rate. The selling price is positively correlated to NPV, an increase in the selling price of 10% or more will make the K1A plant NPV positive. While gas prices, consumption ratios, and exchange rates are negatively correlated to NPV, a decrease of one of these three variables by 10% or more will make the K1A plant NPV positive.