INTP Jul2020

INTP

Contact our analyst Eka

BUY
6th July 2020
Price Rp 11,850
Target price Rp 15,700

Result: Below Expectation

In 1Q2020, INTP booked net revenue of IDR 3.36 trillion down 10% YoY compared to 1Q2019‘s IDR 3.73 trillion. Lower cement sales in 1Q2020, down by -18%, were offset by higher average selling prices, up by +2.4%.
INTP net profit recorded slight growth of +1% YoY to IDR 400.4 billion. The positive net profit growth was supported by cost efficiencies and lower income tax expenses.
Cost of revenues decreased -11% YoY from lower coal prices and savings on fuel & power (-15.2%) with a higher usage of low-calorific value (LCV) coal and of alternative fuels.
Gross profit dropped -9% YoY to IDR 1.06 trillion from IDR 1.16 trillion in 1Q2019 with a steady gross profit margin of 31%.
Operating profit dropped slightly. Higher other operating profit came from exchange rate changes in 1Q020. The net impact was a slight drop in operating profit by -2% YoY to IDR 386.3 billion from IDR 395 billion. The operating profit margin improved to 11.5% from 10.6% in 1Q2019.
The 1Q2020 INTP result was below our expectation caused by the impact of the large-scale social distancing since March 2020 and resulting lower cement demand.
We lower our INTP’s revenue for 2020F to IDR 14.6 trillion or down -8.2% YoY.

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Cement Sales Drop

In May 2020, the cement industry was weak due to the Eid Al-Fitr holidays and implementation of large-scale social distancing.
Domestic cement sales decreased -12.1% YoY to 22.57 million tons for the year to date. For the month of May, domestic cement sales dropped -39.5% YoY to 3,14 million tons.
INTP cement sales volume drop was worse with year to date domestic sales volume down -18.1% YoY to 6.02 million ton from 7.36 million tons in January-May 2019. In May only, INTP sold 866 thousand tons, a drop of -40.6% YoY.
We expect 2Q2020 cement demand will slow further from the impact of the large-scale social distancing and resuming lower cement demand. We are expecting cement demand will rebound in 2H2020 as Indonesia (especially Greater Jakarta and West Java) start to re-open and Government infrastructure development on major strategic projects continues.

Valuation: Maintain BUY with TP 15,700

We are targeting INTP to trade at 28x 2020F PE within a year. Target Price is IDR 15,700 which represents +32% upside.

Previously

INTP Mar2020