INTP
Contact our analyst Eka
BUY, 22% Upside
28th November 2024
Price Rp 6,875
Target price Rp 8,400
28th November 2024
Price Rp 6,875
Target price Rp 8,400
Highest sales volume in October; softer outlook for Q4 2024
- The domestic cement industry consistently achieves its highest sales volume in October. In October 2024, sales volume increased slightly by 0.2% YoY to 6.32 million tons (mt), while cumulative January–October 2024 sales volume grew by 1.4% YoY to 52.35 mt. Bulk cement sales, however, declined by 2.0%, largely due to the completion of phase 1 projects for the new capital city, particularly in Kalimantan. In contrast, bagged cement sales rebounded with a 1.2% YoY increase.
- Indocement Tunggal Prakarsa (INTP) reported strong total sales volume growth of 10.5% YoY to 1.8 mt, driven by a 2.6% YoY increase in bagged cement sales and a robust 30.4% YoY surge in bulk cement sales, primarily due to operational improvements at the Semen Grobogan plant. For 9M 2024, INTP recorded a total sales volume of 14.5 mt, reflecting a 9.4% YoY increase, with significant contributions from the Grobogan plant.
- To mitigate the impact of a weakening Rupiah against the USD, INTP implemented price increases in Q2 2024 and Q4 2024, resulting in a year-to-date price hike of approximately 3%–4%. Depending on market conditions, an additional price adjustment is under consideration for year-end.
- Looking ahead, softer cement demand is anticipated in Q4 2024, influenced by the regional elections in November and the rainy season. While management maintains a domestic sales growth target of 2%–3% for 2024, it expects growth to moderate to 1%–2% in 2025, supported by anticipated housing program stimulus and recovery in the property sector.
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Q3 2024 Results: Margins Recovery in Progress
Valuation: Maintain BUY with TP 8.400
- INTP’s margins improved significantly in Q3 2024, supported by price hikes, efficiency programs, and operational cost-saving measures. Net profit rose by 9.2% YoY and 216% QoQ to IDR 621 billion, with the Net Profit Margin (NPM) recovering to 12% from 4.9% in Q2 2024. Gross profit grew by 7.7% YoY and 59.6% QoQ to IDR 1.78 trillion, with the Gross Profit Margin (GPM) increasing to 34.3%.
- Cost of revenue rose by 3.3% YoY and 16.7% QoQ, driven by higher raw material costs (7% YoY, 11.8% QoQ) and increased manufacturing overhead (14.9% YoY, 6.4% QoQ), particularly at the Maros and Grobogan plants. A 18.5% QoQ increase in fuel and power costs was partially offset by an annual decline of 2.3%, attributed to greater adoption of alternative fuels, which accounted for 21.1% of total fuel consumption in 2024 compared to 18.3% in 2023. This is expected to increase to 25% by 2026.
- The Grobogan plant’s operations in Central Java contributed to reduced delivery, loading, and transportation costs, which declined by 3.7% QoQ. Looking ahead, margin recovery is expected to continue, driven by increased demand and government stimulus for the property sector in 2025.
Valuation: Maintain BUY with TP 8.400
- INTP is forecasted to trade at a 17.0x 2025F Price-to-Earnings (P/E) ratio, with a target price (TP) of IDR 8,400, indicating a 23% upside potential. Therefore, our BUY recommendation is maintained.
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