INTP Nov2023

INTP

Contact our analyst Eka

BUY, 40% Upside
21st November 2023
Price Rp 9,350
Target price Rp 13,100

Highest domestic sales volume since Oct 2021

October 2023 marked the highest domestic cement sales since October 2021. Domestic demand surged by +18.3% YoY to 6.3 million tonnes (mt) in October, driven by low-based volumes from the previous year and continuous dry weather. Bagged cement sales rose by +14.6%, while bulk cement experienced substantial growth of +27.5%. From January to October, domestic cement demand recorded positive growth of +1.4% YoY, totaling 51.6 mt.
Aligned with domestic sales demand, INTP also reported a +15.5% increase in cement sales volume, totaling 1.63 mt. Bagged cement grew by +14.9%, and bulk cement by +17% YoY in October. For January – October, INTP achieved +8.5% YoY growth, reaching 14.1 mt of cement, with bagged cement growing by +23.1% and bulk cement by +31.9%. From January to August 2023, INTP's cement sales continued to grow at +8.5% YoY, reaching 10.8 mt. INTP's market share improved from 25.6% to 27.4% for October YTD.
For 9M2023, INTP’s cement sales recorded +7.1% YoY growth to 13.2 mt, mainly contributed by Maros operation. The market share also improved to 27.6%.
Despite the rainy season at the end of the year, cement demand is expected to rise due to ongoing infrastructure projects, both government and private.

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Improve Margin in 3Q2023

INTP maintained higher margins in 3Q2023 due to volume recovery and higher prices from 1H2023. INTP's sales rose by +4% YoY or 33% QoQ to IDR 4.95 trillion.
Despite higher cost of revenue and higher operating expenses, INTP's bottom line improved +74% QoQ but still decreased -13% YoY, with net profit reaching IDR 569 billion, and the Net Profit Margin (NPM) rising to 11.5% from 8.8% in 2Q2023.
Cost of revenue increased +7% YoY or +29% YoY due to increases in raw material by +16.3% YoY, higher manufacturing overhead costs by +26% YoY, and higher fuel and power costs which increased by +3.4% YoY to IDR 1.46 trillion. Gross profit still increased by +43% QoQ but decreased -1% YoY to IDR 1.65 trillion with a higher Gross Profit Margin (GPM) of 33.4%.
Operating expenses also recorded higher figures, with higher delivery, loading, and transportation costs by +12.7%, higher salaries by +13.7%, and higher financial costs by +20%, resulting in a lower Operating Profit Margin (OPM) at 11.3%.

Semen Grobogan Acquisition

The acquisition of PT Semen Grobogan is expected to close by November 30, 2023, and start consolidating on December 1, 2023. The acquisition funds will come from internal cash. With the acquisition, INTP will maintain a strong position in the Central Java market while enjoying benefits in both logistic cost and production cost efficiency.

Valuation: Maintain BUY with TP 13.100

Regarding valuation, we are setting a target for INTP to trade at a 20X 2024F Price-to-Earnings (PE) ratio within a year, with a target price of IDR 13,100, representing a potential upside of +40%. Therefore, we maintain our recommendation to BUY.

Previously

INTP Oct2023