INTP Aug2022

INTP

Contact our analyst Eka

Hold, 14% Upside
25th August 2022
Price Rp 9500
Target price Rp 10870

Sales contraction continues

Despite a slight increase in domestic cement sales volume, INTP booked lower sales in 1H2022. Domestic cement sales grew +1.2% YoY to 29.36 million tons with a contraction in bag volume of -4% but strong growth of bulk sales of +21%.
INTP’s total sales volume contracted -6.2% YoY to 7.68 mt, while INTP’s domestic sales volume contracted -5.6%. Export sales volume also dropped -25.9% YoY. In June INTP increased prices again for bag products due to the higher coal price, causing INTP’s bag sales to contract more than the market, -10% compared to the market -7.9%.
In July 2022, domestic sales volume continued to contract by -4.8% led by a contraction in the bag market of -10.2% YoY due to the price increases by other players. However, bulk sales did grow by +13.4% YoY.
INTP sales also contracted by -5.6% YoY with bag sales down -10.3% while bulk sales grew by +11.9%.
We maintain our forecast for positive sales volume growth in 2022FY as domestic demand is likely to recover with the bulk market expected to continue to growth inline with spending on infrastructure projects which has started in 2H 2022. But the market will remain overshadowed by rising costs such as higher coal prices.

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2Q2022: Profit Drop

INTP’s profit and margins continued to be depressed by higher energy costs. In 2Q2022, INTP’s revenue increased by +4% YoY but was lower -6% QoQ to IDR 3.35 due to the volume decline. For 1H2022, INTP revenue still grew +4% YoY to IDR 6.91 trillion.
Energy costs rose +26% YoY to IDR 1.13 trillion in 2Q2022 due to the spike in coal prices. This resulted in a cost of revenue increase of +14% YoY. For 1H2022, fuel and power costs rose +39.6% YoY.
This resulted in a gross profit decrease of -19% YoY to IDR 808 billion with a lower GPM of 24.1%.
INTP net profit in 2Q2022 dropped by -54% YoY to IDR 109 billion. This resulted in a lower NPM of 3.3% from 7.3% in 2Q2021.
After twice increasing prices in 1H2022 to mitigate margin contraction, INTP plans to raise the price again in 2H2022 to offset higher coal prices.
As the 2Q2022 result was bellow our expectation, we revise our 2022F profit forecast to IDR 1.11 trillion which is a decrease of -38% YoY.

Valuation: Maintain to HOLD with TP 10,870