SMGR Jun2023

SMGR

Contact our analyst Eka

20th June 2023
BUY 68% Upside
Price Rp 6000
Target price Rp 10100

Higher Sales in May

In May 2023, SMGR experienced higher sales volume, aligning with increased domestic demand. Domestic cement sales rose by 24.9% YoY to 4.87 million tonnes (mt) due to the timing of Lebaran falling at the beginning of May in 2022. Bag sales volume increased by 20% YoY, while the bulk market saw growth of 41.2%.
Total sales for SMGR also recorded a YoY increase of 28.8% to 2.96 mt in May.
However, for January to May 2023, cement sales in the domestic market declined by 5.8% YoY to 22.12 mt, attributed to lower demand due to higher cement prices. During the same period, SMGR's domestic cement sales decreased by 6.1% YoY to 11.45 mt.
In 1Q2023, SMGR's revenue reached IDR 8.93 trillion, reflecting a 4% YoY increase, driven by a 7.7% YoY increase in domestic selling prices (ASP). Sales volume, however, declined by 2.3% YoY to 9.37 mt.
Improvements in cement demand observed in May 2023 indicate a potential recovery in domestic demand, supported by ongoing infrastructure projects in 2H2023. A 6.6% YoY growth in top-line revenue to IDR 38.8 trillion is anticipated for 2023.

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Higher Operating Margins in 1Q2023

In 1Q2023, SMGR's net income increased by 11% YoY to IDR 562 billion, but decreased by 21% QoQ due to seasonality. The higher YoY figure resulted from a 7.8% reduction in financing costs and a 4% decrease in operating expenses, leading to an improved net profit margin (NPM) of 6.3% compared to 5.9% in 1Q2022.
Despite a 6% YoY increase in cost of goods sold (COGS) to IDR 6.48 trillion in 1Q2023, SMGR maintained a flat gross profit of IDR 2.44 trillion, resulting in a lower gross profit margin (GPM) of 27.4%.
Operating expenses decreased by 4% YoY, primarily due to lower transportation, promotion, and labor costs, leading to an improved operating profit margin (OPM) of 9%.
Considering higher cement prices and lower coal prices projected for 2023, SMGR's bottom-line profit is expected to reach IDR 2.7 trillion, which is 15.7% YoY growth.

Valuation: Maintain BUY, TP 10,100 With 68% upside