SMGR
Contact our analyst Eka
21st May 2021
BUY 46% Upside
Price Rp 9,475
Target price Rp13,845
BUY 46% Upside
Price Rp 9,475
Target price Rp13,845
Expecting higher demand
- We expect higher sales volume for SMGR in 2Q2021 and in the 2H2021, as bulk sales demand has shown a recovery in April after months of contraction due to infrastructure projects re starting from the end of March 2021.
- In 1Q2021, Domestic cement sales volume increased by +2.2% YoY to 14.8 mt, while in April 2021, domestic cement market grew +8.6% MoM to 4.89 mt or +3.7% YTD to 19.76 mt. The Bulk market grew a double digit +13.8% YoY while the Bag market saw growth of +7.1%.
- SMGR domestic sales still decreased -8.4% YoY to 7.3 mt, but export sales increased by a double digit +58.1% YoY to 2.37 mt. So SMGR total sales volume growth was +2.1% to 9.7 mt in 1Q2021.
- The lower domestic sales volume in1Q2021 is due to a decrease in bulk cement sales.
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1Q2021: Positive profit growth
Valuation: Maintain BUY, TP 13,845 with 46% upside
- With lower domestic sales volume in 1Q2021, SMGR booked revenue of IDR 8.07 trillion, down -5.9% YoY.
- However, SMGR was able to increase net profit +0.9% to IDR 450 billion with a slightly higher NPM of 5.6% from 5.2% in 1Q2020, mainly due to lower finance costs and lower corporate income tax.
- SMGR continues to manage their cost by maintaining cost efficiencies in coal consumption, electricity, and optimizing the utilization of Waste Heat Recovery Power Generation (WHRPG) which resulted in a cost of revenue decrease of -1.8% YoY to IDR 5.77 trillion. Fuel and energy costs decreased -3.6% YoY, raw material costs also declined -10.5% YoY, and manufacturing overheads were lower by -5.5%.
- Gross profit still decreased -14.7% YoY to IDR 2.3 trillion with a lower gross profit margin of 28.6% from 31.5% in 1Q2021. The EBITDA margin also slightly decreased to 23.3% YoY from 23.6% in 1Q2021.
- We are forecasting SMGR bottom line for 2021F to grow +20% YoY to IDR 3.34 trillion as cost efficiencies are expected to continue, together with higher volumes in the coming quarters.
Valuation: Maintain BUY, TP 13,845 with 46% upside
- We are now targeting SMGR to trade at 21x PE in 2022F. Target price is IDR 13,845 which represents +46% upside. We maintain our BUY recommendation.
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