INTP Mar2021

INTP

Contact our analyst Eka

BUY
25th March 2021
Price Rp 13,000
Target price Rp 17,700

Expecting better demand in 2H2021

Domestic cement sales increased +3.9% QoQ to 18.1 million tons (mt) in 4Q2020, higher growth than other quarters in 2020. However, 2020FY domestic sales volume still decreased by -10.4% YoY to 62.74 mt, with the bulk market contracting -22.2% and the bag market -6.1% YoY.
In January – February 2021, domestic cement sales volume still decreased -9.2% YoY to 20 mt sales volume. Lower demand in early 2021 is the result of heavy rainfall accompanied by floods in some areas.
We expect positive sentiment will impact the cement sector, such as the 2021 infrastructure budget which is higher by 38%, and the establishment of the Sovereign Wealth Fund to attract more investment in infrastructure projects, industrial estates, and the property sector.
The recent down trend of daily new Corona cases and the vaccination process will also boost sentiment on higher cement demand.
We are expecting cement demand to be lower in the 1H2021 but higher in the 2H2021.

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2020FY results: cost efficiency

INTP recorded net revenue in 4Q2020 of IDR 4.03 trillion, better other quarters in 2020, but still down -12.1% YoY. For 2020FY, INTP revenue decreased -11% YoY to IDR 14.2 trillion impacted by lower sales volume.
INTP net profit in 4Q2020 increased +4.6% YoY or 6.6% QoQ to IDR 689 billion. While for 2020FY, INTP net profit decreased slightly -1.58% to IDR 1.81 trillion, with a better NPM of 12.7% from 11.5% in 2019 as they maintained costs.
Gross profit in 2020 decreased -7% YoY to IDR 5.1 trillion, Operating profit decreased slightly -1.5% YoY to IDR 1.87 trillion.
The decline in the bottom line was better compared to the decline in revenue because of efficiency in costs such as electricity and fuel.
We are expecting INTP’s 2021FY revenue and net profit will reach IDR 15 trillion and IDR 1.9 trillion or will grow slightly +5.8% and +7.5% respectively.

Valuation: Upgrade to Buy with TP 17,700

As we expect slight growth both in sales and bottom line following more positive sentiment towards the cement sector, we upgrade our recommendation to BUY.
We are now targeting INTP to trade at 30x 2022F PE within a year. Target Price is IDR 17,700 which represents +36% upside.

Previously

INTP Aug2020