SMGR Mar2023

SMGR

Contact our analyst Eka

24th March 2023
BUY 59% Upside
Price Rp 6250
Target price Rp 9940

Sales volume under pressure

SMGR recorded lower sales volume inline with lower domestic demand in 2022. Domestic cement sales volume weakened -3.4% YoY to 63.03 million tones (mt) led by a contraction in bag sales volume of -8.7% YoY due to price increases, while the bulk market maintained growth of +14.5%.
SMGR’s total sales contracted -12.9% YoY to 36.92 mt. Domestic cement sales contracted -7.2%% YoY to 31.6 mt in 2022, while regional sales contracted -36.4% YoY to 5.28 mt.
For January – February 2023 cement sales, the domestic market was still under pressure with volume declining -2.6% YoY to 9.39 mt, due to prolonged heavy rains in February, while the bag market weakened -6.5% YoY and the bulk market grew by +10.2%.
SMGR’s cement sales in January – February 2023 decreased slightly by -0.2%. Domestic sales volume contracted -3.9% YoY to 4.83 mt while export sales increased +33.5% YoY to 1.07 mt.
Inline with the decline in sales volume, SMGR booked revenue of IDR 36.38 trillion, down slightly by -0.9% YoY due to an ASP increase in 2022 of +8.4% for domestic prices, and an export ASP increase of +25.5%.
We expect domestic demand will recover with ongoing infrastructure projects in 2H2023 while Lebaran and fasting in March – April will lead to temporarily lower demand. We expect top line growth of +15% YoY to IDR 38.8 trillion in 2023F.

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4Q2022: Soften Margin

SMGR booked net income of IDR 715 billion, +8% YoY but -13% QoQ in the 4Q2022 due to a higher ASP and higher fuel and distribution costs. This resulted in a lower NPM compared to 3Q2022 of 6.4%. For 2022FY, SMGR net profit increased +15.5% YoY to IDR 2.36 trillion while the NPM increased to 6.5%.
SMGR’s COGS increased +10% YoY to IDR 7.7 trillion in 4Q2022 due to higher fuel and distribution costs. This resulted in a lower gross profit, down -22% YoY but +14% QoQ to IDR 3.33 trillion.
SMGR managed to lower operating expenses by -12% YoY in the 4Q2022 mainly from lower transportation, promotion and labor costs.
SMGR profit after tax slightly increased +14% from lower tax expenses in 4Q2022.
With higher cement prices and lower coal prices in 2023, we are forecasting SMGR bottom line profit for 2023F to reach IDR 2.7 trillion which is +15.7% YoY growth.

Valuation: Maintain BUY, TP 9,940 with 59% upside