THE FINANCIAL PERFORMANCE AND VALUATION OF PT KRAKATAU STEEL, TBK. PERIOD 2018-2022

• Main Author: Suseno, Michael
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/74446
• Institution: Institut Teknologi Bandung

PT. Krakatau Steel (PTKS), a steel company headquartered in Indonesia, is presently encountering financial challenges because of its substantial debt burden and the competitive pressure posed by less expensive imported steel. The COVID-19 pandemic has intensified these concerns, leading to a reduction in the market's appetite for steel and a consequent reduction in steel prices, thereby exacerbating the company's financial assets. PTKS encounters competitiveness obstacles because of antiquated production techniques and challenges in assimilating novel technologies. Notwithstanding the obstacles encountered, PTKS has demonstrated a positive trend in its net profits since the year 2021, with its return on equity (ROE) surpassing the interest rates offered by bank deposits, thereby rendering it a compelling alternative for potential investors. Nevertheless, the stock performance of the company falls within the median range when compared to its domestic and global counterparts. In order to sustain its competitiveness in the global steel market, PTKS must address its debt obligations, reduce production expenditures, and enhance its operational procedures. The objective of this investigation was to analyze the financial statements and stock valuations of PTKS with the purpose of ascertaining the equitable value of its stock price and overall financial performance. The application of the financial ratio analysis technique was utilized to evaluate liquidity, profitability, debt, short-term and long-term performance, as evidenced in the financial statements. The DuPont analysis was employed to examine the primary driver of the firm's return on equity (ROE). The assessment of value was conducted through the utilization of price multiple and enterprise multiple approaches, with the intrinsic value being ascertained through the free cash flow to the firm methodology. The study's findings indicate that PTKS encounters obstacles with regards to its liquidity and long-term debt in comparison to its peers. The results of the valuation analysis suggest that PTKS's stock price is undervalued in relation to its fair value, except for the EV/EBITDA and Discounted Cash Flow metrics. The performance of the EV/EBITDA and DCF metrics was suboptimal because of the adverse effect of PTKS's debt on its EBITDA and Free Cash Flow to the Firm. In general, this research underscores the difficulties encountered by PTKS amidst the present economic conditions and emphasizes the necessity for the organization to implement measures aimed at enhancing its fiscal outcomes. The company aims to address its debt obligations, reduce production expenses, and embrace innovative technologies to enhance its competitiveness within the worldwide steel sector. Although the organization has demonstrated some advancement in enhancing its net profits, additional measures are necessary to attain enduring financial prosperity.