ID Cement – Strong Start To The Year

Ryan SANTOSO, Fauzan DJAMAL, Andrey WIJAYA – RHB Sekuritas

♦️ Domestic cement sales increased by 8% YoY (-8.4% MoM) to 5.3m tonnes in January. The lower MoM sales volume was attributable to the rainy season’s seasonality. Bulk cement sales increased 16.1% YoY, compared to a low base last year due to people movement restrictions (PSBB).

♦️ Due to their growing price strategies, the two largest cement manufacturers are losing market share. SMGR had the largest reduction in market share, falling to 46.7% in Jan-22 (from 49.3% in Jan-21), while INTP’s market share fell to 26.1% from 26.4% in the same time.

♦️ Indocement’s domestic sales increased 6.7% YoY (-6.7% MoM) to 1.4m tonnes in January. It increased its market share in Western Java, Central Java, and the outer islands, while its market share in East Java decreased marginally.

♦️ Semen Indonesia’s domestic cement sales climbed by 2.1% YoY to 2.5m tonnes in January. To maintain its GPM in the face of rising coal prices, SMGR adopted an aggressive escalating price policy. SMGR recorded lower overseas sales, in which its export sales down 1.4% YoY to 389,000 tonnes and Vietnam facilities sales fell 29.6% YoY to 137,000 tonnes.

♦️ We see positive outlook on this year cement demand thank to robust property pre-marketing sales which is expected to sustain this year. However, the cement industry’s biggest concern remains the recent increase in coal prices.  The government coal DMO obligation should bring positive impact to SMGR and INTP although it may be tough for these companies to get coal at the DMO price.

♦️ Our pick in the sector is INTP (TP: IDR15,500, 39% upside). 

Link to report on Cement sector: https://bit.ly/3oeBJc0

Link to our latest report on INTP: https://bit.ly/3osiHNZ

Link to report on SMGR: https://bit.ly/3q3iC5S