Samuel Securities: SMGR
Highlights: PT Semen Gresik (SMGR) booked 1Q11 net profit of Rp871bn, grew by 8.5% YoY, while revenue up by 9.5% YoY to Rp3.55tn vs Rp3.24tn in 1Q10. While on QoQ basis, the company booked lower performance with revenue and net profit down by 12.3% QoQ and 21.6% QoQ, respectively.
SMGR’s 1Q11 results came in-line within our expectation as its revenue and net profit accounted for 21.4% and 21.1% of our ‘11F estimate. Historically performance in first quarter contributes around 20% of the total full year due to seasonality. We understand the lower QoQ numbers due to seasonality effect and shorter days. It is interesting to note that the company successfully recorded 9.5% YoY revenue growth while their total cement sales only grew by 1.6% YoY in 1Q11. We suspect this mainly due to recent rise in cement price by 3% back in 4Q10. SMGR’s operational performance in 1Q11 underperformed the sector with total cement sales only grew by 1.6% YoY vs 6.9% YoY sector growth. SMGR’s 1Q11 sales volume accounted for 22.2% of our ‘11F volume estimate. The company’s margins eroded by 120bps-170bps in 1Q11 as both COGS/ton and Opex/ton increased by 10.3% and 8.7% YoY as a result of higher energy prices. Gross, EBIT and net margins came at 46.3%, 31.2% and 24.5%, respectively.
Action & Recommendation: We currently still maintain our earnings projection on SMGR despite some downside risks of lower than expected sales volume and higher energy cost. The stock is currently trading at ‘11F PE and EV/EBITDA of 13.7x and 8.7x, which remained as the cheapest among its peers. Maintain BUY