INTP Nov2020

INTP

Contact our analyst Eka

Hold
16th November 2020
Price Rp 14,400
Target price Rp 16,000

Expecting lower 4Q2020 Demand

As of 9M2020, cement sales contracted-9% YoY to 49 million tons with bulk cement market contracting -20.4% and the bag market -4.9%. However September cement sales continue to show recovery with volume increasing +5.9% MoM.
In September, INTP domestic cement sales volume decreased -2.9% and for 9M2020 volume decreased -7.7%, better than the overall market.
In previous years October is normally the peak month of market volume and with the current situation (full-scale PSBB in Jakarta, many demos and year end holidays in December) we are expecting 4Q2020 cement demand will be lower compared to 3Q2020.
With stable ASP, we are expecting INTP revenue in 2020 will reach IDR 14 trillion or down by -12% YoY.

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3Q2020: Margin improved

INTP recorded net revenue of IDR 10.15 trillion down -10.6% YoY.
INTP net profit in 9M2020 declined -5% YoY to IDR 1.11 trillion. Gross profit dropped -6.5% YoY to IDR 3.44 trillion, Operating profit dropped by -7.8% YoY to IDR 1.11 trillion.
The decline in 9M2020 was better compared to the 1H2020 amid margins were better in 3Q2020. INTP recorded a higher gross profit margin in 3Q2020 at 39%, compared to 1Q2020 32%, and 2Q2020 29%. The EBITDA margin was also higher in 3Q2020 at 26% compared to 2Q2020 8% and 1Q2020 21%.
The better margins in 3Q2020 are as a result of lower raw material costs, lower coal prices and savings on fuel & power, leading to lower manufacturing costs.
Although INTP has distributed a cash dividend in July 2020 of IDR 1.8 trillion, INTP has still kept a clean balance sheet with no bank loans and a strong cash position as of 9M2020.
As INTP growth in 4Q2020 will not be as big as in 3Q2020, we are expecting INTP’s net profit will reach IDR 1.7 trillion, down by -4% YoY.

Valuation: Hold with TP 16,000

As we expect lower 4Q2020 cement demand and lower 2020F sales, we maintain our HOLD recommendation for INTP.
We are now targeting INTP to trade at 32x 2021F PE within a year. Target Price is IDR 16,000 which represents +11% upside.

Previously

INTP Aug2020