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Indocement Tunggal Prakarsa (INTP IJ) 26 March 2018
FY 2017 Result Update HOLD (Upgraded)
INDONESIA | BASIC INDUSTRIES - CEMENT | COMPANY UPDATE MARKET PRICE IDR 17,425
TARGET PRICE IDR 19,100 (+9.6%)
Result Highlights PREVIOUS IDR 19,800
• Revenue came in at IDR 14.4 tn (-6.1%), Net profit fell to IDR 1.86 tn (-51.9%).
COMPANY DATA
• Declining profitability margins in the midst of higher energy costs and lower selling O/S SHARES (BN) : 3.681
price. MARKET CAP (IDR TN) : 63.13
MARKET CAP (USDBN) : 4.60
• FY18/19 Earnings revised down. 52 - WK HI/LO (IDR) : 23,950/15,800
Weak 2017 Earnings 3M AVG. VOLUME (MN SHARES): 1.44
PAR VALUE (IDR) : 500
INTP recorded FY 2017 net income of IDR 1.86 trillion (-51.9%) (86% of our estimate, 90%
of consensus). Revenue dropped 6.1% to IDR 14,4 tn from IDR 15.3 tn, triggered by freefall MAJOR SHAREHOLDERS, %
in Ready-Mix Concrete sales (-23.7%). Despite rising sales volume (+2.5%), revenue from BIRCHWOOD OMNIA LIMITED 51%
cement dipped (-3.22%) as average selling price (ASP) was under pressure. STANDARD LIFE ABERDEEN PLC 4.60%
MASSACHUSETTS MUTUAL LIFE INS 3.52%
BLACKROCK 1.34%
Margin Pressure VANGUARD GROUP 1.28%
Meanwhile, cost of revenues increased by 4.3% to reach IDR 9.4 tn ending the consecutive
decline in the past two years. As expected, the rise in fuel and power expenses represented PRICE VS. JCI
the highest increase in cost of revenues (+15.77%). Nonetheless, looking from per ton 160
perspective, COGS per tonne in fact decreased to IDR 555,000/tonne (-0.2%). Furthermore, 150
similar trend could be seen in its operating expenses, where it grew by 14.1% to IDR 2.3 140
trillion and ended the successive decreases in the past two years. Significant increases 130
could be found in Advertising and promotion account under selling expenses where it 120
jumped by 173% to IDR 108 bn as INTP tried to increase customer base via promotion and 110
end-user programs. Other operating expenses also soared by 177% to reach IDR 121 bn. As 100
a result, we see margin compression with GPM down to 34.7% (vs 41.2% in FY16), OPM fell 90
to 13% (vs 23.7%) and NPM was halved to 12.9% (vs 25.2%). 80
17 17 17 17 17 17 17 17 17 17 18 18 18
- - - - - - - - - - - - -
Sumatera-bound r pr y un ul ug ep t ov ec n eb r
The new Palembang terminal commenced its operation last week (19/03/2018). The 3.2 Ma A Ma J J A S Oc N D Ja F Ma
hectare new terminal has a jetty port, 2 cement silos with 5,000 tonnes capacity each, 1 INTP Rebased JCI Rebased
cement packer of 120 tonne/hour capability, a bulk cement loader and a 1,458 m2 Source: Phillip Sekuritas Indonesia Research,
warehouse among others. Another terminal is being built in Lampung on a 4.2 hectare area Bloomberg
and is targeted to operate in 3Q18. It will contain 3 steel cement silos with capacity of
4,000 tonnes apiece, 1 jetty port, 1 cement packer of 180 tonne/hour capability, a bulk KEY FINANCIALS
cement loader and 1,000 m2 warehouse among others. The new terminals is intended to IDR bn FY17A FY18F FY19F
cater the Southern Sumatera market and expected to give INTP a stronger foothold in the 14,431 15,072 15,860
island. Management believes Sumatera is a prospective market to focus on after Java. The Revenue
double digit cement demand in the area – 14.2 million tonnes of cement were consumed in EBITDA 2,964 3,245 3,510
Sumatera in 2017, and better infrastructure made the management to invest in the area, Net Profit 1,860 2,083 2,397
especially when INTP’s market share in the area could do with a little improving (11%). EPS, IDR 505 566 651
P/E, x 34.49 30.79 26.77
Rating and Valuation P/BV, x 2.61 2.54 2.45
We slightly decrease our DCF-derived 12-month forward target price to IDR 19,100. As EV/EBITDA, x 18.88 17.08 14.97
such, we re-upgrade the rating to HOLD reflecting the undervalued nature it currently in ROE, % 7.6 8.2 9.2
ROA, % 6.4 7.0 7.8
following the plunge in its share price. INTP share is currently trading at 30.79 x PE or at or Div. Yield, % 2.10% 2.36% 2.71%
near its 3 year historical PE average and also at 17.08x EV/EBITDA. Source: Phillip Sekuritas Indonesia Research
Valuation Method: DCF
Anugerah Zamzami Nasr (+62 57900800)
anugerah.zamzami@phillip.co.id
Page | 1 | PHILLIP SEKURITAS INDONESIA
INDOCEMENT TUNGGAL PRAKASA RESULT UPDATE
Figure 1 – INTP Profitability Margin Figure 2 – INTP’ Earnings
25
50% 20%
20
40% n 0%
illio15
30% r -20%
T 10
R
20% D
I -40%
10% 5
0 -60%
0% 2014 2015 2016 2017 2018F 2019F
2015A 2016A 2017A 2018F 2019F
Total Revenues Net Income
Gross Profit Margin OP Margin NPM
Revenue Growth (RHS) Net Income Growth (RHS)
Source: Company, Phillip Sekuritas Indonesia Research
Figure 3 – Coal Price Figure 4 – INTP PE Band
USD/Ton 60
120
100 50
80 40
60
40 30
20
20
0 10
0
Ma Ma J Se N J Ma Ma J Se N J Ma
ul p ov an ul p ov an
r y - - r y - - r
- 2016 - - 2017 - 2017 - - 2018 -
Rotterdam Newcastle HBA 2016 - 2016 2016 2017 - 2017 2017 2018
2016 2017
PE Avg PE PE +1 std
PE -1 std PE +2 std PE -2 std
Source: PSI Research, Bloomberg, Ministry of Energy and Mineral Resources Source: PSI Research
Figure 5 – Earnings Revision
New Old Change
IDR bn 2018F 2019F 2018F 2019F 2018F 2019F
Revenue 15,072 15,860 15,395 16,099 -2.10% -1.48%
Operating Profit 2,108 2,460 2,296 2,586 -8.21% -4.85%
Net Income 2,083 2,397 2,243 2,494 -7.13% -3.91%
Page | 2 | PHILLIP SEKURITAS INDONESIA
INDOCEMENT TUNGGAL PRAKASA RESULT UPDATE
Financials
FYE 2016A 2017E 2018F 2019F
Income Statement (IDR bn)
Revenue 15,362 14,431 15,072 15,860
COGS 9,030 9,423 9,640 9,890
Gross profit 6,331 5,008 5,433 5,971
Operating expenses 2,687 3,133 3,325 3,510
Operating profit / EBIT 3,645 1,875 2,108 2,460
EBITDA 4,578 2,964 3,245 3,658
Interest income 496 416 457 489
Interest expense 7 5 5 6
Other non-operating expense 5 10 10 10
EBT 4,146 2,287 2,562 2,947
Tax expenses 275 427 479 551
Net Income 3,870 1,860 2,083 2,397
Revenue Breakdown (IDR bn)
Cement 13,185 12,760 13,475 14,300
Ready Mix Concrete 2,167 1,652 1,575 1,533
Aggregate 9 19 23 27
Balance Sheet (IDR bn)
Cash and cash equivalents 9,674 8,295 8,841 9,506
Account Receivable 2,617 2,504 2,615 2,752
Inventories 2,002 1,978 2,023 2,075
PPE - net 14,644 14,979 15,129 15,287
Other assets 1,214 1,108 1,148 1,199
Total assets 30,151 28,864 29,756 30,819
Account Payable 2,126 2,276 2,329 2,389
Accrued Expenses 773 870 923 974
Other current liabilities 289 333 349 372
Capital Lease 37 20 21 22
Other non-current liabilities 787 808 844 888
Total liabilities 4,012 4,307 4,466 4,645
Total Equity 26,139 24,557 25,290 26,174
ASP Cement (IDR) – excl clinker 801,547 759,396 763,193 770,824
Cement Sales Vol (mn tonnes) – excl clinker 16.45 16.80 17.66 18.55
Source: Phillip Sekuritas Indonesia Research
Page | 3 | PHILLIP SEKURITAS INDONESIA
INDOCEMENT TUNGGAL PRAKASA RESULT UPDATE
FYE 2015A 2016A 2017E 2018F 2019F
Cash Flow Statement (IDR bn)
Net income 3,870 1,860 2,083 2,397
Depreciation & Amortization 933 1,089 1,162 1,221
Changes in NWC 218 436 (42) (63)
Others (520) 104 7 4
Cash Flow from Operations 4,502 3,489 3,210 3,558
Capex (1,752) (1,414) (1,300) (1,368)
Others (120) (13) (19) (19)
Cash Flow from Investing (1,872) (1,427) (1,319) (1,387)
Dividends (1,528) (3,420) (1,350) (1,512)
Others (84) (21) 5 6
Cash Flow from Financing (1,612) (3,441) (1,345) (1,506)
Net change in cash 1,018 (1,379) 546 665
Cash Ending 9,674 8,295 8,841 9,506
Valuation Ratios
P/E (x) 14.65 34.49 30.79 26.77
P/B (x) 2.17 2.61 2.54 2.45
Dividend Yield (%) 6.03% 2.10% 2.36% 2.71%
EV/EBITDA (x) 10.29 18.88 17.08 14.97
Growth & Margins
Growth
Cement Revenue -13.5% -3.2% 5.6% 6.1%
Revenue -13.7% -6.1% 4.4% 5.2%
Gross profit -19.9% -20.9% 8.5% 9.9%
Operating profit -27.9% -48.6% 12.4% 16.7%
EBT -26.6% -44.8% 12.0% 15.1%
Net Income -11.2% -51.9% 12.0% 15.1%
Margins
Gross Margin 41.2% 34.7% 36.0% 37.6%
EBIT Margin 23.7% 13.0% 14.0% 15.5%
EBITDA Margin 29.8% 20.5% 21.5% 23.1%
Net Profit Margin 25.2% 12.9% 13.8% 15.1%
Key ratios
ROA 12.8% 6.4% 7.0% 7.8%
ROE 14.8% 7.6% 8.2% 9.2%
Current Ratio 4.5x 3.7x 3.8x 3.9x
DER 15.3% 17.5% 17.7% 17.7%
Per share data (IDR)
EPS 1,051 505 566 651
DPS 415 929 367 411
BVPS 7,101 6,671 6,870 7,110
Source: Phillip Sekuritas Indonesia Research
Page | 4 | PHILLIP SEKURITAS INDONESIA
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