INTP Sep2024

INTP

Contact our analyst Eka

BUY, 26% Upside
12th September 2024
Price Rp 6,800
Target price Rp 8,600

Sales: Bulk Share Increased

Domestic cement sales volume grew by +2.2% to 28.02 million tons (mt) in 1H 2024. Bulk cement sales rose by +13.2% to 8.46 mt, while bagged cement sales fell by -1.9% to 19.55 mt. The decline in bagged cement sales was attributed to weakened purchasing power, whereas the increase in bulk sales was spurred by government projects in the new capital city and infrastructure development in Java.
The share of bulk cement in the domestic market increased to 30% in 1H 2024 from 27% in 1H 2023, reflecting a trend driven by infrastructure projects since early 2024.
INTP reported a total sales volume growth of +8% YoY to 9.03 mt, with domestic sales reaching 8.87 mt, up by +10% YoY, largely due to operations at Semen Grobogan. Bagged cement sales saw a slight increase of +1.9%, while bulk cement surged by +32.2% YoY. INTP's domestic market share rose to 29.4% from 27.4%.
INTP passed on additional costs from the weakening Rupiah against the USD through higher ASP in 2Q2024, leading to a -4.2% drop in bag sales in June. Depending on market conditions, INTP is considering a price hike in 2H 2024.
In July, demand for both bagged and bulk cement improved, with expectations for this trend to continue due to the dry season. However, higher prices and reduced purchasing power may dampen overall demand. Management maintains a 2%-3% domestic sales target for 2024.

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Q2 2024 Results: Weakening Margins

INTP's margins have been gradually decreasing since Q1 2024 due to a higher proportion of bulk cement sales, competitive pricing strategies, and the weakening Rupiah.
Net profit fell by -40% YoY and -17.4% QoQ to IDR 197 billion, with the Net Profit Margin (NPM) dropping to 4.9% from 8.8% in Q2 2023.
The cost of revenue increased by 13.8% YoY to IDR 2.92 trillion, influenced by higher raw material costs, transportation rates, and a 21.7% YoY depreciation of the Rupiah, along with a 22.8% YoY rise in direct labor costs. This resulted in a -73.3% YoY decrease in gross profit to IDR 1.12 trillion, with the Gross Profit Margin (GPM) at 27.7%.
Margin recovery is anticipated with increased demand during the dry season and potential price adjustments in 2H 2024.

Valuation: Maintain BUY with TP 8.600

We project INTP to trade at a 17.6x 2025F Price-to-Earnings (PE) ratio, setting a target price of IDR 8,600, suggesting a potential upside of +27.4%. Therefore, we maintain our BUY recommendation.

Previously

INTP May 2024