SMGR Nov2021

SMGR

Contact our analyst Eka

9th November 2021
BUY 34% Upside
Price Rp 9,575
Target price Rp12,850

Recovery continues

Domestic cement sales volume continues to grow +5.5% YoY to 46.9 million tones (mt) in 9M2021, while for September domestic sales increased +4.1% to 6.43 mt.
Cement sales volume continues to recovery in 4Q2021 too as the October domestic sales recorded +10%-11% YoY.
For 3Q2021 SMGR sales volume increased +13.3% QoQ but was still lower compared to 3Q2020 -2.8% YoY to 10.7 mt.
While for 9M2021, SMGR total sales volume maintained positive growth of +2.5% YoY to 29.88 mt. SMGR’s Export sales grew +14.8% YoY to 6.6 mt but domestic sales were slower -0.6% to 23.22 mt.
With higher sales volume, SMGR booked sales of IDR 9.1 trillion lower -5% YoY from a lower ASP because of a price war in the domestic market. For 9M2021 SMGR sales slightly decreased -1.1% to IDR 25.3 trillion.
The management increased ASPs in October and plans another increase in November to offset higher coal prices.
We expect higher sales growth in 4Q2021 as October sales shows double-digit growth and most infrastructure projects are continuing in 4Q2021.

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Lower Margins

Due to higher material prices especially coal prices, SMGR margins decreased in 3Q2021.
SMGR booked lower net profit -36% YoY to IDR 593 billion with a lower NPM of 6.5% from 9.7% last year. For 9M2021, net profit decreased 29.7% YoY to IDR 1.38 trillion with a lower NPM of 5.5%.
Inline with higher coal prices, SMGR fuel and energy costs increased +4% YoY. Cost of sales also increased +2.8% YoY to IDR 17.8 trillion in 9M2021.
Gross profit decreased -9.6% YoY to IDR 7.4 trillion with a lower gross profit margin of 29.4% in 9M2021.
SMGR finance costs continue to decrease in 9M2021 to IDR 1.26 trillion from 1.75 trillion. Operating expenses were -10% lower YoY.
Operating profit margin still decreased though to 8.4% from 9% in 9M2020.
We are forecasting SMGR bottom line for 2021F will still be positive with growth of +1.4% YoY to IDR 2.83 trillion helped by a higher ASP and higher sales volume in 4Q2021.

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Valuation: Maintain BUY, TP 12,850 with 34% upside

We are now targeting SMGR to trade at 25x PE in 2022F. Target price is IDR 12,850 which represents +34% upside. We maintain our BUY recommendation.

Previously

SMGR Aug2021