UBS Indonesia Energy Industrials: Navigating Through Policy and Geopolitical Risks
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UBS assesses the landscape of Indonesia's energy and industrial sectors, emphasizing that companies must carefully navigate an environment shaped by policy shifts and geopolitical tensions. In the near term, regulatory uncertainties surrounding subsidy reforms and tightening environmental regulations could elevate corporate costs. Simultaneously, geopolitical risks, including global supply chain disruptions and trade frictions, pose distinct challenges for energy exports and the procurement of industrial raw materials.
Despite these immediate hurdles, UBS highlights robust long-term structural demand. Indonesia's ongoing energy transition, supported by renewable energy targets, and substantial infrastructure investments—such as new capital construction—are expected to drive sustained industry growth. UBS forecasts Indonesia's GDP to expand by 5.2% in 2026, underpinning domestic demand for energy and industrial services.
Stock-specific recommendations reflect this dual dynamic. UBS maintains a Buy rating on PT Adaro Energy with a target price of IDR 2,500, citing stable domestic coal demand. PT Perusahaan Listrik Negara (PLN) is rated Hold with a target of IDR 4,000; while electricity demand is growing, subsidy risks temper the outlook. In the industrial space, PT Wijaya Karya earns a Buy rating and an IDR 1,800 target, driven by government infrastructure projects. Primary risks include delays in policy execution and rising global interest rates affecting financing costs.