KRAS
Contact our analyst Revita
BUY. Going to dominate
28th January 2018
Current price Rp520
Target price Rp720
28th January 2018
Current price Rp520
Target price Rp720
Going to dominate
- PT Krakatau Steel (Persero) Tbk (KRAS) the largest integrated steel producer in Indonesia plans to dominate in the domestic market by expanding Hot Steel Mill (HSM) # 2 production by 1.5 mn tons. As of 9M17, progress has reached 35.93%. KRAS is targeting completion by 1H19.
- After the expansion, total hot steel mill capacity will increase 63% to 3.9 mn tons and in total rolling mill capacity will increase 48% from 3.15mn tons to 4.65mn tons.
- As of 2016, steel imports reached 54% while as of 1H17 KRAS has markets shares of HRC at 35.85%, CRC 25.37% and WR 3.92%. By increasing its capacity KRAS can take market share from imports and help the local supply shortage.
- Higher average selling price of all steel products will increase margins.
- Higher efficiency in 2018 will come from a new blast furnace complex which as of 9M17 was 99.43% completed.
- KRAS also plans to reduce financial expenses from a bond issuance this year as part of capital restructuring.
- We are targeting 2017-2018 EBITDA margin will average 17% with 2018 net profit margin of 2.55% compared to net loss in 2017.
- Based on DCF, with WACC 9.0%, we are targeting within one year KRAS target price of IDR.720/share or 22.7x PER.
- 38% upside potential, BUY
