SMGR May2024

SMGR

Contact our analyst Eka

15th May 2024
BUY 54% Upside
Price Rp 4220
Target price Rp 6500

Volume decreased, while bulk increased

From January to March 2024, domestic cement sales volume remained flat at 14.27 million tons, with bulk cement increasing by +14.9% (Java +11.1% YoY and Outside Java +20.5% YoY), while bag cement declined by -5.5%. The decrease in the bag market was due to lower retail demand during the fasting period and the Eid holiday. Conversely, the spike in the bulk market was driven by government projects in the new capital city and infrastructure acceleration in Java.
SMGR reported a decrease of -4.3% YoY, reaching 7.09 mt in Q1 2024 for domestic sales volume. Total sales for SMGR also decreased by -2.1% YoY to 9.17 mt in Q1 2024, despite a boost from higher export sales growth of +5.7% to 1.71 mt.
The bulk cement contribution increased to 30.3% of SMGR's total domestic sales volume from 27% in Q1 2023, reflecting lower retail cement demand. Bulk cement rose by +7.1% to 2.15 mt, while bag cement decreased by -8.5% to 4.94 mt.
Due to lower sales volume, SMGR's revenue also decreased by -6.3% YoY or -23.8% quarter-over-quarter (QoQ) to IDR 8.93 trillion.
For April, sales volume is expected to remain contracted due to the long holiday, although the trend of increasing bulk cement portion is expected to continue in 2024F.

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Q1 2024: Lower Margin

SMGR's bottom-line profit and margin declined due to an increase in the bulk cement portion of sales volume, resulting in a lower consolidated price.
Costs of revenue in Q1 2024 decreased by -4.9% YoY, due to lower sales volume with cost per ton decreasing by -2.8% to IDR 813 thousand. Raw material expenses also decreased by -2.4% YoY, and fuel and energy costs decreased by -1.8% YoY.
This resulted in a lower gross profit, down by -9.8% YoY or -19.4% QoQ to IDR 2.2 trillion, leading to a gross profit margin (GPM) of 26.3%.
SMGR's net income decreased by -16% YoY but increased by +3.4% QoQ to IDR 472 billion, with the net profit margin (NPM) gradually increasing QoQ to 5.6%.
As SMGR maintains cost and operational efficiencies amidst a contraction in retail demand, we expect margin improvement in the second half of 2024. We project SMGR's bottom-line profit to reach IDR 2.4 trillion, representing a significant 14% YoY growth for 2024F.

Valuation Maintain BUY, TP 6,500

We maintain our BUY recommendation with a target price (TP) of IDR 6,500, indicating a potential 54% upside. This valuation is based on a 16x price-to-earnings (PE) ratio for 2025F.

Previously

SMGR Mar2024