SMGR
Contact our analyst Eka
24th March 2023
BUY 59% Upside
Price Rp 6250
Target price Rp 9940
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
Valuation: Maintain BUY, TP 9,940 with 59% upside
- 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
- We are now targeting SMGR to trade at 25x PE in 2023F. Target price is IDR 9,940 which represents +59% upside. We maintain our BUY recommendation.
Previously