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SMGR

Contact our analyst Eka
15th November 2023
BUY 41% Upside
Price Rp 6225
Target price Rp 8800

Positive cement sales volume in 9M2023
  • In September, domestic cement sales grew by +4.4% YoY to 6.11 million tonnes (mt), supported by continuous dry weather. The bag market increased slightly by +1.1%, while the bulk market maintained significant growth at +13.3%. The higher growth in the bulk market indicates sustained recovery in major construction projects, while the bag market remained flat due to retail customers switching to ready-mix products. For 9M2023, domestic cement demand slightly decreased by -0.6% YoY, totaling 45.3 mt, attributed to lower demand in the first half of 2023.
  • However, SMGR outperformed with a 7% YoY increase in domestic cement sales, reaching 3.19 mt in September 2023. Total sales for SMGR increased by +2.3% YoY to 3.57 mt in September after impressive growth in August.
  • Despite the overall domestic market's +0.7% YoY increase to 23.4 mt in 9M2023, SMGR's revenue reached IDR 27.66 trillion, reflecting a 4% YoY increase, driven by higher sales volume mainly from bulk and export. Export sales volume jumped by +62% YoY to 4.7 mt, with the majority sold to Australia, Bangladesh, Philippines, Taiwan, Sri Lanka, and Timor Leste.
  • For 3Q2023, SMGR's revenue recorded +7% YoY or +31% QoQ, growth to IDR 10.6 trillion due to a higher ASP. ASP is also expected to increase in October due to higher costs.
  • As the dry season continued in October, resulting in higher growth, and ongoing infrastructure projects will boost demand, we expect higher cement demand in 4Q2023.

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Margins Improve in 3Q2023
  • After a decline in 2Q2023, SMGR's bottom line profit and margin improved in 3Q2023, although still lower compared to 3Q2022.
  • SMGR net income increased +1% YoY or +178% QoQ, primarily due to higher ASP and lower operating expenses (-7% YoY), offsetting the highest cost of revenue by +12% YoY in 3Q2023. The net profit margin (NPM) increased to 8% in 3Q2023, while it remained stable at 6.2% for 9M2023.
  • Higher costs of revenue in 3Q2023, driven by increased raw material usage (+3% YoY) and higher fuel and energy costs (+17%), resulted in a lower gross profit, down by -3% YoY but still higher QoQ by +54% to IDR 3.02 trillion, resulting in a higher QoQ gross profit margin (GPM) of 28.5%.
  • Considering the expected trends of higher cement prices and improving cement demand, SMGR's bottom-line profit is projected to reach IDR 2.5 trillion, representing a substantial 7% YoY growth.

Valuation Maintain BUY, TP 8,800
  • We maintain our BUY recommendation with a target price (TP) of IDR 8,800, indicating a potential 41% upside. This valuation is based on a 23x price-to-earnings (PE) ratio for 2024F.
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Previously
​SMGR Oct2023
SMGR Jun2023​
​SMGR Mar2023
SMGR Nov2022
​SMGR Sep2022
​SMGR Jun2022
​SMGR Mar2022
​SMGR Nov2021
​SMGR Aug2021
​SMGR May2021
​SMGR Mar2021
​SMGR Nov2020
​SMGR Aug2020
​SMGR May2020
​SMGR Mar2020
SMGR, April 2019
SMGR, Nov 2018
​SMGR, May 2018
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