by Batavia Prosperindo Sec
Waiting for Bigger Capacity
• Lower growth than competitor’s
Lack of capacity to match the Indonesian cement demand growth caused SMGR sales growth being outnumbered by its competitor’s (INTP & SMCB). Up to the 3Q-2011 SMGR has recorded sales worth of Rp. 11.61 bn, growing 12.81% compared than in 3Q-2010. Smaller than INTP (20.62%) and SMCB (26.15%). As for 9M-2011 net income, SMGR recorded an increase of 8.18% (Rp. 2.76 bn) compared to the same period last year (Rp. 2.55 bn). The maximum production capacity is still the main concern for SMGR as the new cement factory has not been completed yet.
• New factory on the way
The Tonasa V and Tuban IV cement plant project which have been started since 2009 are expected to complete in 2012. This will give SMGR the capacity to increase its cement production. Other ongoing project is the Tonasa power plant project. A 2 x 35 MW power plant is built to support the energy need of the cement plant in Tonasa.
• Still expecting growth in the Indonesian cement demand
As the government plan to push infrastructure in order to drive the Indonesian economy, we predicted that cement demand in 2012 will still grow. With new plant and bigger production capacity in 2012, SMGR is expected to be able to maintain its market share as the biggest cement producer in Indonesia.
• Upgraded Target Price with Revised Recommendation
Based on the ongoing new plant development and the expectation of the rising cement demand in 2012 we revise our recommendation from “HOLD” to “BUY” for SMGR. We also upgraded our target price from Rp. 9,900 to Rp. 10,800.