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SMGR

Contact our analyst Eka
6 Sept, 2019
BUY
Price Rp 13,425
Target price Rp16,700

1H2019 Results: a lower bottom line
  • In 1H2019, SMGR had double digit growth in revenue of 22.9% yoy to IDR 16.35 trillion.
  • COGS also grew 22.9%, but SMGR still enjoyed a gross profit increase of 22.8% yoy to IDR 4.66 trillion from IDR 3.79 trillion in 1H2019. The Gross profit margin was stable at 28.5%.
  • Profit before tax decreased by -48.7% to IDR 1.32 trillion, impacted by higher finance costs (+256.2%) as result of higher loans after the acquisition of Solusi Bangun Indonesia (Holcim).
  • The EBITDA margin decreased  slightly -0.2% yoy to 19.4%. Net income also decreased by -50.1% yoy to IDR 485 billion.
  • As SMGR is expecting a better bottom line 1-2 year ahead, we estimate 2019 SMGR net income will decrease by -50% YoY to IDR 1.54 trillion and then will get better in 2020F.

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Expecting higher demand in the 2nd semester
  • In the beginning of the second semester of 2019, demand for cement has shown a slight increase. In July 2019, Industry domestic sales volume was 6.45 million tons (mt) up slightly +0.5% YoY. SMGR domestic sales volume decreased -6.04% YoY to 2.35 mt impacted by decreases in West Java (-24.1%) and Jakarta (29.7%).
  • For July 2019 Ytd, SMGR sales volume including Thang Long Cement  in Vietnam and SBI reached 21.3 mt an increase of +20.5% yoy from 7M2018 (SBI not included). While Industry domestic sales volume was 35.82 mt, lower by -1.7% YoY. SMGR’s domestic volume decreased by -5.84% YoY to 13.49 mt.  
  • We expect an improvement in cement demand in the second semester of 2019 as infrastructure projects continue and the new capital city is developed in East Kalimantan.
  • As of July 2019, SMGR market share in Kalimantan was 46.3%.  SMGR’s high market share’s in East Kalimantan is supported by their packing plants in Balikpapan and Samarinda.
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Valuation: Upgrade to BUY, TP 16,700 with 24.4% upside
  • As our Domestic cement market shown signs of increasing and therefore assuming better sales in the second semester, we are targeting SMGR share price to reach IDR 16,700 which is a valuation of 37x PE.
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Previously
April, 2019
Nov, 2018
​May, 2018
PT. Binaartha Sekuritas

Setiabudi Atrium, Jl. HR Rasuna Said No.62, RT.18/RW.2, Karet Kuningan, Setia Budi, Jakarta Selatan, DKI Jakarta 12920
+62215206678 | email: kyc.online@binaartha.com

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