WTON
Contact our analyst Revita
33% upside
18th June 2020
Current price Rp 302
Target price Rp 400
18th June 2020
Current price Rp 302
Target price Rp 400
Revised contracts attainable
WTON is revising down their ew contracts target from previously IDR 11.5 tn in 2020 because of the impact of the Covid-19 outbreak. As of 1Q20, IDR. 865 billion new contracts were booked which is down 41% yoy and 8% of the initial target. The new contracts are still dominated by infrastructure projects at 62.39% of the total. Based on customer profile (% of revenue), most new contracts are from parent WIKA Group and SOEs at 24.9% and 32.2% respectively. In order to mitigate the impact of the covid 19 outbreak, WTON is running strategic action plans, one of which is to maximize sales from carry over contracts (of IDR 5,87 trillion) including from WIKA Group. WIKA Group will help by accelerating payments from the HSR project, as well as Harbour (Ancol-Pluit), and Semarang-Demak toll roads, in 3Q20. This will result in an increase in utilization of WTON’s plants in Subang and Karawang which has been low at 40% up to May 2020. We have revised our new contract estimation target using a worse case scenario to IDR. 6,6 trillion or down -20% yoy. Going forward, with the strategic plans implemented, we believe WTON will be able to achieve our revised target despite the current slowdown.
WTON is revising down their ew contracts target from previously IDR 11.5 tn in 2020 because of the impact of the Covid-19 outbreak. As of 1Q20, IDR. 865 billion new contracts were booked which is down 41% yoy and 8% of the initial target. The new contracts are still dominated by infrastructure projects at 62.39% of the total. Based on customer profile (% of revenue), most new contracts are from parent WIKA Group and SOEs at 24.9% and 32.2% respectively. In order to mitigate the impact of the covid 19 outbreak, WTON is running strategic action plans, one of which is to maximize sales from carry over contracts (of IDR 5,87 trillion) including from WIKA Group. WIKA Group will help by accelerating payments from the HSR project, as well as Harbour (Ancol-Pluit), and Semarang-Demak toll roads, in 3Q20. This will result in an increase in utilization of WTON’s plants in Subang and Karawang which has been low at 40% up to May 2020. We have revised our new contract estimation target using a worse case scenario to IDR. 6,6 trillion or down -20% yoy. Going forward, with the strategic plans implemented, we believe WTON will be able to achieve our revised target despite the current slowdown.
Sign up here to trade what you want, when you want & wherever ⬇️ you are ⬇️
Margins to improve
In order to improve margins amid the current market situation, WTON is also doing a cost reduction program at both COGS and overhead costs levels. This plan started earlier this year with the Supply Chain management (SCM) being integrating into WTON to improve speed, reduce cost and improve margins. WTON is starting this project in the Pasuruan Plant and then throughout all sales areas and plants in 2H2020, to be completed in 2021. We estimate the average EBITDA margin in 2020-2021F will improve to 14.8% compared to 14,3% In 2019A.
Valuation: 33% upside
Based on our adjustments, we are targeting IDR. 400/share, which is 7,2x PER and below our prior projection. Still, with 33% upside expected we maintain BUY.
In order to improve margins amid the current market situation, WTON is also doing a cost reduction program at both COGS and overhead costs levels. This plan started earlier this year with the Supply Chain management (SCM) being integrating into WTON to improve speed, reduce cost and improve margins. WTON is starting this project in the Pasuruan Plant and then throughout all sales areas and plants in 2H2020, to be completed in 2021. We estimate the average EBITDA margin in 2020-2021F will improve to 14.8% compared to 14,3% In 2019A.
Valuation: 33% upside
Based on our adjustments, we are targeting IDR. 400/share, which is 7,2x PER and below our prior projection. Still, with 33% upside expected we maintain BUY.
Previously
