WTON
Contact our analyst Revita
38% upside
14th April 2021
Current price Rp 310
Target price Rp 410
14th April 2021
Current price Rp 310
Target price Rp 410
Higher New contract target
WTON is targeting 2021F contracts of IDR 8 trillion compared to IDR. 4,27 trillion new contracts in 2020A. We are targeting 70% of that to be realized this year in the midst of the ongoing pandemic. The new contracts target is still dominated by infrastructure projects. Based on customer profile (% of revenue), most new contracts in 2020 are from parent WIKA Group and SOEs at 25,8% and 38,9% respectively. WTON is still mitigating the impact of the current pandemic by maximizing sales from carry over contracts (IDR 4,4 trillion) including from WIKA Group. WTON is also monitoring production and distribution schedules to control inventory, disbursement of receivables, securing contracts, and securing payments. Those are WTON's strategies in the midst of the pandemic. In addition, WTON continues to grow and develop in 2021 by launching new products, namely CLC (Concrete Level Crossing), precast for road-level railroad crossings and SHMS (Structural health monitoring systems) for detecting the structural health of a bridge. We believe WTON will achieve better results this year through their strategies and efficiencies.
Targeting a better net margin
WTON 2020 net margin decreased significantly to 2.67% compared to 7.23% in 2019. This was due to a decrease in plant utilization from the normal 80-85% to just 51% in 2020, resulting in inefficiencies in production costs which eroded the GPM. Inefficiencies occur when plant utilization is below normal. As a result, the NPM was down too. We estimate, margins will improve when production and utilization improve in 2021, to a target of 70%. In addition, WTON is also improving efficiency by combining the Karawang concrete plant with the Subang plant to become one, total sales areas are reduced to 6. We are targeting the 2021F net margin to improve to 3,92%.
Valuation: 38% upside
Based on our adjustments, we have a target price of IDR. 410/share, which is 11x PER. With 38% potential upside, we maintain BUY.
WTON is targeting 2021F contracts of IDR 8 trillion compared to IDR. 4,27 trillion new contracts in 2020A. We are targeting 70% of that to be realized this year in the midst of the ongoing pandemic. The new contracts target is still dominated by infrastructure projects. Based on customer profile (% of revenue), most new contracts in 2020 are from parent WIKA Group and SOEs at 25,8% and 38,9% respectively. WTON is still mitigating the impact of the current pandemic by maximizing sales from carry over contracts (IDR 4,4 trillion) including from WIKA Group. WTON is also monitoring production and distribution schedules to control inventory, disbursement of receivables, securing contracts, and securing payments. Those are WTON's strategies in the midst of the pandemic. In addition, WTON continues to grow and develop in 2021 by launching new products, namely CLC (Concrete Level Crossing), precast for road-level railroad crossings and SHMS (Structural health monitoring systems) for detecting the structural health of a bridge. We believe WTON will achieve better results this year through their strategies and efficiencies.
Targeting a better net margin
WTON 2020 net margin decreased significantly to 2.67% compared to 7.23% in 2019. This was due to a decrease in plant utilization from the normal 80-85% to just 51% in 2020, resulting in inefficiencies in production costs which eroded the GPM. Inefficiencies occur when plant utilization is below normal. As a result, the NPM was down too. We estimate, margins will improve when production and utilization improve in 2021, to a target of 70%. In addition, WTON is also improving efficiency by combining the Karawang concrete plant with the Subang plant to become one, total sales areas are reduced to 6. We are targeting the 2021F net margin to improve to 3,92%.
Valuation: 38% upside
Based on our adjustments, we have a target price of IDR. 410/share, which is 11x PER. With 38% potential upside, we maintain BUY.
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