SMGR
Contact our analyst Eka
28 May, 2020
BUY
Price Rp 9,275
Target price Rp14,300
BUY
Price Rp 9,275
Target price Rp14,300
Expecting Lower Demand
- The covid-19 outbreak has led to the delay of many property and infrastructure project.
- This will likely hurt cement demand because cement demand growth has been dominated by bulk to support infrastructure project.
- Lower demand will be compounded by more competition in the coming quarters as new players enter the market this year.
- We are expecting cement demand to decline more than 10%-20% in line with delayed government projects.
- SMGR sales volume in April 2020 showed a slight improvement despite slower domestic demand. SMGR sales volume in April grew +0.47% YoY and has increased +5.35% year to date in 2020 compared to same period last year. Sales volume in March decreased -1.99% YoY.
- Domestic sales volume in April declined -6.81% YoY and for the year to date has decreased by -5.22% YoY.
- SMGR sales volume in 1Q2020 has not yet been affected by Covid-19, so we expect lower utilization from lower demand will have an impact in 2Q2020, 3Q2020 and 4Q2020 mainly in Java area.
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1Q2020 Results: Above expectation
Valuation: Maintain BUY, TP 14,300 with 54% upside
- In 1Q2020, SMGR revenue grew 5.57% YoY to IDR 8.58 trillion from IDR 8.17 trillion in 1Q2019 in line with higher sales volume of 7% YoY.
- Lower cost of revenue in 1Q2020 resulted in double digit growth in gross profit of 22% YoY to IDR 2.7 trillion from IDR 2.2 trillion in 1Q2019. Inline with the increased in the gross profit margin to 31.5% from 27.2% in 1Q2019.
- EBITDA also increased 25.5% YoY to IDR 2 trillion from 1.6 trillion, with a higher EBITDA margin of 23.6%.
- Profit before tax increased 57% YoY to IDR 713 billion, in line with lower finance costs which were down -13.4% YoY to IDR 552 billion from 637 billion in 1Q2019.
- Net income recorded double digit growth of 66.5% YoY to IDR 446.5 billion.
- As we see slow cement demand in the next quarters, we expect single digit growth for the bottom line and lower margins in 2020F.
Valuation: Maintain BUY, TP 14,300 with 54% upside
- We are targeting SMGR share price to reach IDR 14,300 which is a valuation of 31x PE within a year.
Previously