National cement sales volume grew 2.8% yoy in 5M24 supported by a significant growth in bulk cement demand of 13.7% yoy, but the demand still contracted by 1.3% yoy. Both cement companies SMGR and INTP increased their bag cement prices by about 2%. However, we think the price increases could have a negative impact on the sales volume going forward as the market demand is still weak. Downgrade the cement sector to MARKET WEIGHT with SMGR as our top pick.
GREATER CHINA Sector Property: Expect sales improvement in May on low base; watch PBOC’s and NDRC’s actions in 2Q24; add Longfor to top picks. Results Estun Automation (002747 CH/SELL/Rmb16.64/Target: Rmb14.00): 4Q23/1Q24: Another two sets of disappointing results; erosion of ASP and margins not over yet. INDONESIA Results Ace Hardware Indonesia (ACES IJ/BUY/Rp880/Target: Rp1,200): 1Q24: NPAT up 29.3% yoy; in line with expectations. Indocement Tunggal Prakarsa (INTP IJ/BUY/Rp7,125/Target: Rp8,8...
INTP’s 1Q24 net profit fell 35.9% yoy and 65.1% qoq to Rp238b, mainly due to the low sales volume season and a decline in blended ASP. The results missed our and market expectations; however it may improve in 2Q24 as economic activities return to normal. We project 2024 net profit of Rp2.0t (+3.5% yoy) and 2025 NPAT of Rp2.2t (+7.2% yoy). Maintain BUY with a lower target price of Rp8,800 (previously Rp12,000). We still like INTP as it is trading at an attractive valuation of -1.5SD EV/EBITDA.
Ace Hardware Indonesia (ACES IJ/BUY/Rp880/Target: Rp1,200): 1Q24: NPAT up 29.3% yoy; in line with expectations. Indocement Tunggal Prakarsa (INTP IJ/BUY/Rp7,125/Target: Rp8,800): 1Q24: NPAT falls 35.9% yoy and 65.1% qoq on seasonally weak sales volumes; results below expectations. Sarana Menara Nusantara (TOWR IJ/BUY/Rp880/Target: Rp1,200): 1Q24: Moderate net profit growth of 6% yoy. Maintain BUY. Semen Indonesia (SMGR IJ/BUY/Rp4,700/Target: Rp7,000): 1Q24: Weak sales volume from bag segment ...
INTP reported 4Q23 net profit of Rp683b, down 23.7% yoy but up 20.1% qoq mainly due to efficiency in fuel and power costs. 2023 NPAT met expectations, rising 5.9% yoy on a 10% yoy increase in sales volume and efficiency in fuel and power costs. The outlook for 2024-25 remains positive with potential sales volume growth of 9.8% yoy and 3.0% yoy respectively. We project 2024 net profit of Rp2.5t (+28.8% yoy) and 2025 NPAT of Rp2.6t (+3.5% yoy). Maintain BUY with a higher target price of Rp12,000.
Indocement Tunggal Prakarsa (INTP IJ/BUY/Rp8,700/Target: Rp12,000) : 4Q23: Net profit improves on higher sales volume and fuel cost efficiency; results within expectations. TRADERS’ CORNER Bank Jago (ARTO IJ): Technical BUY Adaro Energy Indonesia (ADRO IJ): Technical BUY
GREATER CHINA Results Anta (2020 HK/BUY/HK$83.55/Target: HK$109.60): 2023: Results beat on margin; on track to fulfil three-year targets. CR Land (1109 HK/BUY/HK$24.85/Target: HK$42.39): 2023: Results in line; clearer growth path ahead. CR Mixc (1209 HK/BUY/HK$23.60/Target: HK$33.20): 2023: Results beat with higher payout ratio; pursue high-quality growth. Nexteer Automotive Group (1316 HK/SELL/HK$3.24/Target: HK$2.20): 2023: Earnings miss estimate again on margin squeeze. Maintain SELL. Cut tar...
National cement demand continued to grow 2.5% yoy in 11M23. On the other hand, cement wholesale price index remained soft in Nov 23, decreasing 1.0% in 11M23. ASP remains soft due to bag cement which accounts for 71% of the national cement demand. Considering the industry conditions, we lower our target prices for the cement stocks under our coverage as we now expect a more conservative growth in ASP. Maintain OVERWEIGHT on the cement sector with INTP as our top pick.
GREATER CHINA Initiate Coverage iFlytek (002230 CH/BUY/Rmb45.38/Target: Rmb62.00): Trailblazer in voice recognition AI poised to capture AIGC opportunities. Update Li Ning (2331 HK/SELL/HK$21.35/Target: HK$18.80): Unreasonable property purchase reflects weak corporate governance. INDONESIA Update Indocement Tunggal Prakarsa (INTP IJ/BUY/Rp9,375/Target: Rp14,100): Acquisition to regain market share with potential earnings accretion of 11.2%. MALAYSIA Update Westports Holdings (WPRTS MK/BUY/RM3....
INTP bought 100% of Semen Grobogan’s shares at a fair valuation, implying EV/EBITDA of 6-8x and cost/tonne capacity of about US$123/tonne. We foresee a potential earnings accretion of 11.2% in 2024 NPAT on more efficient logistics costs after the acquisition and estimate 2023-24 NPAT at Rp2.1t (+16.3% yoy) and Rp2.4t (+32.5% yoy) respectively. Maintain BUY with a higher target price of Rp14,100. We like INTP as it has potential EBITDA and NPAT growth of 28% and 32% respectively in 2024.
The earnings growth trend will continue in 4Q23 as volumes remain strong with most infrastructure projects’ construction being accelerated before the year ends. Margin expansion will continue in 4Q23 and 2024 as coal prices are potentially lower. We expect SMGR to record 2023-24 NPAT growth of 14.9% yoy and 20.6% yoy respectively and INTP to record 18.9% yoy and 12.6% yoy growth respectively. Maintain OVERWEIGHT on the cement sector with INTP as our top pick.
The growth in national cement demand has continued to show positive improvement up till Aug 23. In 8M23, SMGR’s and INTP’s sales volumes grew 6.5% yoy and 8.5% yoy respectively. The outlook remains positive with expected sales volume growth of 2% yoy in 2023. For 2023 and 2024, we expect SMGR to record NPAT growth of 30.9% yoy and 11.6% yoy respectively and INTP to post 18.9% yoy and 12.6% yoy NPAT growth respectively. Maintain OVERWEIGHT on the cement sector with SMGR as our top pick.
In Jul 23, both SMGR’s and INTP’s cement sales volume indicated positive growth and the positive trend could continue in 2H23. Both SMGR and INTP believe that there is room for ASP increase in 2H23. We still expect margins will continue to improve in 2H23 as well as volume expansion and more efficiency in operational expenses. We expect SMGR/INTP to record 2023-24 yoy NPAT growth of 30.9%/48.9% and 11.6%/11.6% respectively. Maintain OVERWEIGHT. SMGR is our top pick.
We see potentially stronger demand in the cement market in 2H23 due to: a) the continuation of projects, with construction works meeting targets; and b) higher demand from the property and retail sectors as housing sales and renovations are back to normal. We expect ASPs to remain stable with a potentially slight increment on stronger cement demand in 2H23. We expect SMGR/INTP to record 2023 yoy NPAT growth of 30.9%/48.9% respectively. Maintain OVERWEIGHT. SMGR is our top pick.
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