SMGR Mar2022

SMGR

Contact our analyst Eka

16th March 2022
BUY 66% Upside
Price Rp 6,625
Target price Rp10,700

Recovery continues

In 2021, Domestic cement sales volume maintained single digit growth of +4.3% YoY to 65.2 million tones (mt) but volume is still -6.8% below the pre-pandemic demand.
Domestic cement sales volume continues to recover in January 2022 with +8% YoY growth driven by strong bulk market growth of +16.1%. The bag market also grew +5.8% YoY in January 2022.
SMGR total sales volume slightly decreased -0.6% YoY because of a decrease in export sales -2.8% YoY and a decrease in Vietnam cement sales -29.6% YoY. But SMGR domestic sales maintained positive growth of +2.1% YoY to 2.47 mt.
For 4Q2021, SMGR booked sales of IDR 9.26 trillion, higher QoQ from an ASP hike in 4Q2021.
With slightly increased sales volume and the ASP hike in 2021 due to higher coal prices, SMGR booked full year sales of IDR 34.9 trillion, a slight decline of -0.6%.
We expect demand will continue to recover as January’s domestic sales shows higher growth.

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Lower Finance Cost, Higher tax

SMGR booked net income of IDR 2.02 trillion, down -27.6% mainly due to higher tax. In October 2021, the government announced the cancellation of the corporate tax reduction from 2022 onward, so instead of 20%, it will remain at 22%. NPM also decreased to 5.8% from 7.9% in 2020. For 4Q2021, SMGR booked lower net income, down -49% YoY but higher +7% QoQ with a better NPM of 36.4%.
Coal prices remain high which led to an increase in SMGR’s fuel costs by +15.5% YoY. This resulted in a decline in gross profit -6% YoY to IDR10.9 trillion with a lower gross profit margin of 31.3% from 33% in 2020.
SMGR finance costs continue to decrease -30% YoY to IDR 1.62 trillion due to a decrease in the interest bearing debt as SMGR repaid IDR 7.3 trillion of debt in 2021.
SMGR managed lower operating expenses, down by -8% mainly from a decrease in transportation costs and lower accruals. As a result, profit before tax slightly decreased by -1% with a stable OPM of 9.9%.
As we expect cement demand will continue to recover and SMGR will be able to minimize the impact of fuel costs. We are forecasting SMGR bottom line for 2022F to reach IDR 2.89 trillion which is 43% YoY growth.

Valuation: Maintain BUY, TP 10,700 with 66% upside

We are now targeting SMGR to trade at 19x PE in 2023F. Target price is IDR 10,700 which represents +66% upside. We maintain our BUY recommendation.

Previously

SMGR Nov2021