INTP Mar2020

INTP

Contact our analyst Eka

BUY
24 March 2020
Price Rp 10,400
Target price Rp 15,800

2019FY: Higher profit

INTP booked net revenue of IDR 15.94 trillion in 2019 +4.9% YoY led by a price recovery which started in the 2nd semester of 2018.
INTP also managed their cost of revenue through various strategies.
Cost of revenues decreased -3,5% YoY from lower coal prices, higher usage of low-calorific value (LCV) coal, and higher usage of alternative fuels; fuel costs decreased -10,1% YoY.
Gross profit grew 26% YoY to IDR 5.5 trillion from IDR 4.37 trillion in 2018 and the gross profit margin improved from 28.8% in 2018 to 34.5% in 2019.
Operating profit rose +77.3% YoY to IDR 1.9 trillion from IDR 1.07 trillion and the operating profit margin improved to 11.9% from 7.1% in 2018.
INTP net profit was up +60.2% YoY to IDR 1.83 trillion, from IDR 1.14 trillion in 2018 and the net profit margin also improved from 7.5% to 11.5%.
Good results in 2019FY were driven by a better average price, higher sales volume, and well managed fixed costs. We estimate 2020F, INTP bottom line profit will reach IDR 1.95 trillion.

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February Volume Negative

In February 2020, the cement industry was still in the low season due to prolonged rains. Domestic cement sales YTD decreased -4,0% YoY to 4.64 million tons.
For the month of February, domestic cement sales decreased slightly by -0.1% YoY to 4,87 million tons.
INTP cement sales volume YTD decreased -12.4% YoY to 2.68 million ton from 3.06 million tons in 2018. In February only, INTP sold 1,31 million tons or a decrease of -7.5% YoY.
We expect 1Q2020 cement demand will slow further from the impact of the COVID-19 virus plus heavy rainfall. We have revised our forecast from moderate growth to negative growth for cement demand in 2020F.

Valuation: Upgrade to BUY with TP 15,800

We are targeting INTP to trade at 30x 2020F PE within a year. Target Price is IDR 15,800 which represents +52% upside.
We are upgrading our target to BUY from HOLD, as INTP price is now at the lowest level since 2009 and we believe the fundamental outlook is still promising.

Previously

January 2020