Results Review:
Indocement Tunggal Prakarsa (INTP IJ, Neutral, TP: IDR15,700)
Competition Likely To Remain Intense
Indocement Tunggal Prakarsa (INTP IJ, Neutral, TP: IDR15,700)
Competition Likely To Remain Intense
Competition in
domestic cement industry – especially in Indocementbased markets – is likely to
remain intense. The company booked a lower 2M17 sales volume, as well as lower
market share. To deal with the current competition, Indocement gave more
discounts for its Tiga Roda brand and increased penetration of its
second brand Rajawali in the West Java market. To boost its earnings,
the company shifted production to its new plant, which is more efficient.
Maintain NEUTRAL with a DCF-based TP of IDR15,700 TP (2% downside), premised on
15x FY17F P/E.
♦ Competition to remain
intense. In
1Q17, we see EBIT margin likely to be still under pressure, due to an
overcapacity situation on domestic cement industry. Indocement’s 2M17 sales
volume declined to 2.5m tonnes (-6.8% YoY) with its market share slipping to
25.5% in 2M17 (2M16: 26.9%). In our view, this was driven by weak sales in
Indocement-based markets (such as Jakarta, Banten, and Kalimantan), also rising
competition. Indocement gave more discounts for its Tiga Roda brand and
increased penetration of its second brand Rajawali.
♦ To improve efficiency
and sales volume. Indocement
Tunggal Perkasa (Indocement) shifted production from old plants to its new
plant (P14). According to management, P14 production costs are around
USD7-8/tonne (or around 11-12%) lower than its other plants. In term of sales,
Indocement would optimise its product mix to have a higher value add, increase
clinker sales in both to domestic and export markets, as well as boost domestic
sales volumes.
♦ Maintain NEUTRAL with a IDR15,700 TP implying 15x FY17F P/E.
♦ Below than expected 4Q16 earnings. Indocement’s 4Q16 earning came in at IDR724bn (+0.7% QoQ, -36.5% YoY), which were below expectations and driven by both lower-than-expected sales volume and ASPs. This caused EBIT margin to narrow to 20.7% in 4Q16 (vs 23.2% in 3Q16 and 28.3% in 4Q15).
Kindly click the following link for the full report: Indocement Tunggal Prakarsa : Competition Likely To Remain Intense
Best regards,
♦ Maintain NEUTRAL with a IDR15,700 TP implying 15x FY17F P/E.
♦ Below than expected 4Q16 earnings. Indocement’s 4Q16 earning came in at IDR724bn (+0.7% QoQ, -36.5% YoY), which were below expectations and driven by both lower-than-expected sales volume and ASPs. This caused EBIT margin to narrow to 20.7% in 4Q16 (vs 23.2% in 3Q16 and 28.3% in 4Q15).
Kindly click the following link for the full report: Indocement Tunggal Prakarsa : Competition Likely To Remain Intense
Best regards,
Andrey
Wijaya
Senior Vice President
Research Analyst – Auto, Consumer, Cement
PT. RHB Securities Indonesia
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