Refer to Important disclosures in the lastpage of this report StockData Target price (Rp) Rp11,500 Prior TP (Rp) Rp11,500 Shareprice (Rp) Rp10,500 Upside/downside (%) +9.5 Sharesoutstanding (m) 5,932 Marketcap. (US$ m) 4,586 Free float (%) 49.0 Avg. 6m dailyT/O (US$ m) 4.0 Price Performance 3M 6M 12M Absolute (%) 1.7 19.3 11.7 Relative to JCI (%) -2.8 13.1 1.3 52whigh/low (Rp) 11,025 - 8,050 Major Shareholders Government 51.0% Estimate Change; Vs. Consensus 2017F 2018F Latest EPS (Rp) 434 602 Vs. Prior EPS (%) - - Vs. Consensus (%) -16.7 -3.2 Source: Bloomberg Chandra Pasaribu PT Indo Premier Sekuritas [email protected]+62 21 5793 1168 EBITDA margin at the lowest Volume grew +9.3% yoy, thanks to infrastructure …but EBITDA margin only at 16.6% in 3Q17 Balance remained intact Maintain our Hold call Result was below expectation. Semen Indonesia booked net income of Rp1.5tn (-50.2% yoy) in 9M17, below our and consensus numbers due to lower- than-expected ASP, despite improvement in volume with growth of 9.3% yoy. Nevertheless, net income grew +5.8% qoq to Rp367bn mostly affected by seasonality as 2Q17 was a slow from Ramadhan festive seasons. Sales volume grew 23.4% qoq in 3Q17, but with ASP continued to drop marginally by -1.3% qoq. Overall, strong volume recovery was not enough to restore profitability despite it helped to soften ASP decline. We do not expect any speedy recovery in profitability before industry consolidation. EBITDA margin at the lowest. In 3Q17, EBITDA margin was 16.6%, which was historical low for Semen Indonesia. In 2Q17, EBITDA margin was 20.7%, while in the past before the price war, Semen Indonesia’s EBITDA margin were around 30%. ASP has dropped -7.1% yoy in 9M17 and -1.3% qoq, while manufacturing cost per ton increased +4.2% yoy and +2.5% qoq. Higher manufacturing was mainly driven by increase prices in raw materials, energy cost and depreciation. This increase has outweighed cost improvement in logistics and packaging. With the price was still exist in the market, Semen Indonesia was forced to absorbed any cost increase. We expect that consolidation within the industry as such low EBITDA could not support sustainability. Net gearing at 19% as of Sep17. Semen Indonesia’s balance sheet remained healthy despite pressure on profitability. Net gearing of the company stood at 19% as of Sep17 with net debt of Rp5.7tn. We expect that Semen Indonesia should be able to generate EBITDA of Rp5.5tn in FY17 and Rp6.7tn in Fy18, which should be sufficient to repay any debt. The company has decided to rationalized capex as no major capex in required. Semen Indonesia’s balance sheet is sufficient to support any corporate action in acquisition. We remain confident that Semen Indonesia will survive current price war. Hold maintained. We remain cautious on the cement industry due to the oversupply. Nevertheless, the industry could get positive catalyst if demand from property improves. However, we remain skeptical that profitability will follow improvement in demand. To restore profitability, the industry might consolidate first. We maintain our Hold call on Semen Indonesia due to the healthy state of its balance despite the pressure on profitability. Semen Indonesia (SMGR IJ) 02 November 2017 Results Note HOLD (Unchanged) Year To 31 Dec 2015A 2016A 2017F 2018F 2019F Revenue (RpBn) 26,948 26,134 25,784 29,812 34,345 EBITDA (RpBn) 7,265 6,611 5,452 6,708 7,967 EBITDA Growth (%) (11.6) (9.0) (17.5) 23.0 18.8 Net Profit (RpBn) 4,521 4,522 2,576 3,573 4,645 EPS (Rp) 762 762 434 602 783 EPS Growth (%) (18.8) 0.0 (43.0) 38.7 30.0 Net Gearing (%) (0.5) 11.1 9.1 (0.8) (11.0) PER (x) 13.8 13.8 24.2 17.4 13.4 PBV (x) 2.3 2.0 2.0 1.9 1.7 Dividend Yield (%) 3.6 3.6 3.6 2.1 2.9 EV/EBITDA (x) 8.7 9.5 12.2 9.5 7.6 Source: SMGR, IndoPremier Share Price Closing as of : 1-November-2017 Equity | Indonesia | Cement 80 85 90 95 100 105 110 115 120 Nov-16 Nov-16 Dec-16 Jan-17 Jan-17 Feb-17 Mar-17 Mar-17 Apr-17 May-17 May-17 Jun-17 Jul-17 Aug-17 Aug-17 Sep-17 Oct-17 Oct-17 SMGR-Rebase JCI Index-Rebase
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Semen Indonesia 02 November 2017 SMGR IJ HOLD (Unchanged)
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Refer to Important disclosures in the lastpage of this report
Total SHE + Minority Int. 27,441 30,574 31,185 33,550 36,494 Total Liabilities & Equity 38,153 44,227 39,871 42,180 45,215
Source: SMGR, IndoPremier
SMGR Results Note
5 Refer to Important disclosures in the last page of this report
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Cash Flow
Net Income (Excl.Extraordinary&Min.Int) 4,525 4,535 2,591 3,589 4,663 Depr. & Amortization 1,366 2,111 1,909 1,993 2,078 Changes in Working Capital 1,128 (801) 21 (243) (274)
Acct. Receivables TO (days) 46.4 51.5 54.0 50.0 50.1 Acct. Receivables - Other TO (days) 1.5 1.9 2.5 2.3 2.4
Inventory TO (days) 6.2 6.4 6.4 6.7 6.6 Payable TO (days) 76.3 88.1 87.2 83.1 84.6 Acct. Payables - Other TO (days) 4.6 5.6 6.5 6.2 6.3
Debt to Equity (%) 14.0 20.5 7.1 3.3 0.0 Interest Coverage Ratio (x) 0.1 0.1 0.1 0.0 0.0 Net Gearing (%) (0.5) 11.1 9.1 (0.8) (11.0)
Source: SMGR, IndoPremier
Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167
INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period
ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any
responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or
sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this