PT Indocement Tunggal Prakarsa TBK (INTP:IJ)

COMPANY NOTES
PT Indocement Tunggal Prakarsa TBK
(INTP:IJ)
Bayu Cahyadi
bayu.cahyadi@profindo.com
MARKET CAP
IDR 80.4 TRILLION
SHARES OS
3.7 BILLION SHARES
CURRENT PRICE
IDR 21850/SHARE
TARGET PRICE
IDR 22100/SHARE
UP/DOWNSIDE
1.14%%
RATING
NEUTRAL
HOPING FOR INFRA PROJECTS
Indocement, the second largest cement producer in Indonesia, may
face difficult year ahead due to slower demand from property sector,
more competitors coming and lower average selling price. However,
infrastructure development may become the hope for cement
industry. We expect that cement demand for infrastructure to double,
+6 million ton next year. While the company will finish its 4.4 million
ton expansion at the end of 2015, the contribution can be felt in 2016.
We estimate that the fair value of equity for the company should be
at IDR 22100/share.
FY14 Result: Revenue Up 7%, Net Profit Up 5%
FY14, Indocement was successfully inked better result: Revenue up 7% YOY,
to IDR 19.99T while net profit was up ~5% YOY to IDR 5.27T. The net profit
growth was lower than the revenue due to weak Rupiah, higher electricity
and logistic tariffs. Market share in Java was drop 1% to 38.8% due to
significant decrease in Banten area by -7.8% as Krakatau-Posco project was
completed. On the other hand, market share outside Java increased by 1.2%
especially in Sulawesi (+5.9%) and East of Indonesia (+6.1%). Overall, the
company kept its market share at 30.4% in Indonesia.
More Bulk Cement Demand
Historically, Bag Cement demand was always bigger than bulk cement (~7984% bag vs 21-16% bulk). However, due to government’s aggressive
infrastructure program, we believe that the demand for bulk cement will go
up significantly. While infra budget for 2015 is almost double from ~150T
Rupiah to 290T Rupiah, we estimate that there will be additional of at least 6
million ton cements in 2015. This is positive for the whole industry due to
oversupply condition lately.
Bulk Cement vs Bag Cement
100%
80%
60%
Bulk
40%
Bag
20%
0%
2008
2009
Source: Company estimation, ASI
March 20, 2015
www.profindo.com
2010
2011
2012
2013
2014
PT Indocement Tunggal Prakarsa Tbk
Company’s Strategy due to Lower ASP
After our government lowers the cement price by 5%, Indocement has been doing
efficiency in its operation such as using more slag than clinker. Clinker usage ratio will
be lower by using more slag. The company stated that it already has a slag contract
with Posco and Indoferro. We believe that the margin will improve in 2015.
Moreover, electricity tariff has been reduced by our government due to lower oil
price. Nonetheless, low coal price may also help company to maintain its margin.
Valuation
We estimate that the industry may grow ~5% this year, supported by aggressive
government’s infra program and better environment for property (tendency for lower
interest rate). Thus, we estimate that the fair equity value of Indocement to be at
22.100/share, 15.01x PE FY15F, 2.75% upside potential. Net cash position is really
good for the company as uncertainty in the cement industry goes up.
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PT Indocement Tunggal Prakarsa Tbk
KANTOR PUSAT
KANTOR CABANG BANDUNG
http://www.profindo.com
Gedung Permata Kuningan, Lt. 19
Jl. Kuningan Mulia, Kav. 9C, Guntur
Setiabudi
Jakarta Selatan 12980
Phone : +62 21 8378 0888
Fax
: +62 21 8378 0889
Jl. Sunda No. 50B
Bandung, Jawa Barat
Phone : +62 22 420 2678
Fax
: +62 22 420 2676
EMAIL :
bayu.cahyadi@profindo.com
abdul.aziz@profindo.com
DISCLAIMER
This research report is prepared by PT PROFINDO INTERNATIONAL SECURITIES for information purposes only and is
not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or
other financial instruments. The report has been prepared without regard to individual financial circumstance,
need or objective of person to receive it. The securities discussed in this report may not be suitable for all
investors. The appropriateness of any particular investment or strategy whether opined on or referred to in this
report or otherwise will depend on an investor’s individual circumstance and objective and should be
independently evaluated and confirmed by such investor, and, if appropriate, with his professional advisers
independently before adoption or implementation (either as is or varied).
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