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Danareksa Equity Snapshot - INTP, 14 Februari 2020
February 14, 2020 09:56

Indocement Tunggal Prakarsa

Bad weather resulted in sluggish sales

The extreme weather and heavy rainfall which caused floods in many areas in Indonesia hit cement demand in Jan20. INTP booked cement sales of 1.30mn tons (-10%yoy and -20%mom) with sales sluggish in Java and Sumatra. Historically, sales in 1Q account for 23% of the full year sales, while sales in Jan contribute 8% of the full year sales and 35% of the 1Q sales. INTP’s sales in Jan are 7% of our FY target. Maintain BUY.

Floods in the western part of Java dragged down INTP’s Jan sales volume. The extreme weather in Jan and heavy rainfall which caused floods in many areas resulted in cement sales volume of 1.30mn tons for INTP, or -9.6%yoy and -20.1%mom. The sales volume in 6 selling regional areas recorded negative growth on both a yoy and mom basis. In Java, cement sales were -6.4%yoy. Most notably, sales were flat in Jakarta (+0.4%yoy), -10.7%yoy in Central Java and -4.1%yoy in West Java, INTP’s main markets. Around 76% of INTP’s turnover is in Java. Sales in Sumatra - which accounted for 9% of the sales - dropped 20.2%yoy. The Nusa Tenggara and Kalimantan markets accounted for 8% and 5% of the sales.

Soft sales in January owed to extreme weather. Nationwide, domestic cement sales in Jan 2020 reached only 5.20mn tons, or -7.4%yoy and -20.4%mom. Based on the area, only East Indonesia booked positive yearly sales at +25.5%yoy albeit -0.8%mom. However, sales in East Indonesia constituted only 4.0% of the national cement demand. Cement consumption in Java, the country’s most populous island, was -9.9%yoy and -18.3%mom. Java accounted for 55% of the domestic demand. Furthermore, sales in Sumatra which accounted for 21% of the market were -8.9%yoy and -20.8%mom. Historically, sales in 1Q account for 23% of the FY sales, with Jan contributing ~8% to the FY sales or 36% of the 1Q sales.

Sales in Jan accounted for 7% of our target. We expect INTP to sell more cement this year than in 2019. Our 2020 cement target is set at 18.4mn tons, representing growth of 4%yoy, compared to the flattish growth in FY19 of +0.3%yoy. Historically, INTP’s cement sales in 1Q are 23% of the full year sales with sales in Jan contributing 8% of the FY sales and 35% of the 1Q sales. INTP’s sales in Jan are 7.1% of our FY20 target.

Maintain BUY. INTP maintained market share at ~25% in Jan20. The ratio is stable compared to the previous month (24.9%) and the previous year (25.6%). INTP is trading at EV/ton of USD147, below its -1SD historical EV/ton at USD155.

… read more 20200214 INTP