Wednesday, December 14, 2011

PT Indocement Tunggal Prakarsa Tbk - Keeping up with the rising demand

by Batavia Prosperindo Securities

• High national cement demand

Along with the rising demand of national cement consumption, up to 9M-2011 INTP has booked a total sales volume of 11,434 thousand tones, rising 12% compared to the same period last year. Pushed by high demand, as per 3Q-2011 INTP has reported revenue of Rp. 9,779.6 billions, growing 20.6% from 3Q-2010. As for the net income, INTP recorded an increase of 8.75% compared to last year. Lower growth in the net income was caused by the rising energy costs since last quarter 2010, which could not be fully absorbed by the 3% and 1% increase in INTP cement price in October 2010 and in July 2011. But overall, INTP performance up to the 3Q-2011 is still inline with the consensus.

• Still have enough room to increase its cement production

Three cement factories of INTP (Citeureup plant, Palimanan plant & Tarjun Plant) utility currently are still below 90% of its full capacity, and the average utility is around 79.04%. This space will give INTP the ability to meet the future rising demand of cement consumption and maintain its current market share of Indonesian cement producer.

• Expecting more cement demand in the future

The rising trend of Indonesian cement demand is expected to continue in the future. Low interest rate can become a catalyst to boost the property sector, while the government is also trying to build more infrastructure to backed up the growth of economy. Anticipating this INTP is currently building a couple of new plants and increasing the old plants capacity.

· New Target Price with revised Recomendation

Considering all the point’s above we revise our recommendation from “HOLD” to “BUY”, with new TP of Rp. 18,000.

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