COMPANY UPDATE INDONESIA

November 9, 2010 Research Division

PT Semen Gresik Tbk.

Efficiency program + Capacity development to boost future performance

Buy 9M Financial performance

Last Price (Rp)
Fair Value (Rp)
Until the year 2010 9M SMGR revenue decreased by -1% YoY to Rp 10.4 trillion or
reflect 64% of our revenue projections at the end of 2010. While the volume of
cement sales in 9M 2010 only raised by 2.4% YoY to 12.7 million tons. Although
9,450
relative income has not changed much, but the company managed to reduce its
10,000(+5%) production costs by 5% to only Rp 5.3 trillion. This led to net income SMGR continue
growing by 5% YoY to Rp 2.5 trillion in 9M 2010.

Repair & maintenance of manufacturing facility in Tuban at the end of the second
Stock Data quarter, plus a low realization of cement consumption in the third quarter due to the
‘lebaran’ holiday, causing sales volumes were unchanged. Until the end of the year,
RICS / Bloomberg SMGR.JK/SMGR.IJ the sales volume is expected to 19.5 million tons. Actual absorption government
Issued Shrs. (m) 5,931 budget spending in infrastructure which must be absorbed within the budget this year
Market Cap (Rp bn) 56,052 both from the state budget and b local govt budgets in Q4 of this year will be the
drivers of the increasing realization of sales.
52 W High / Low Rp10,350/Rp6,900
Major Shareholders : Improve Production Capacity
Increasing production capacity is still a central issue for SMGR performance. Through
its capital spending for new plant construction and power generation facilities,
capacity SMGR this year will reach 19.5 million tons, and then increased to 20.5
Govt. of Indonesia 51.01% million in 2011. SMGR capacity will grow again in 2012 to 24 million tons. Associated
Public 48.99% with increased production capacities, SMGR still in the assessment phase acquisition
of several cement factories located both domestically and regionally.

Earnings Estimates Efficiency Program

PT Semen Gresik Tbk (SMGR) develop a geothermal power waste (waste heat recovery
2010F 2011F generation / WHRG) with a capacity of 8.4 megawatts (MW) in order to cope with
fluctuations in the electricity supply generated by PT PLN (Persero). The power plant
Net Profit (Rp mn) will be completed in late 2011 and will be used by PT Semen Padang. This will lead to
AAA Estimate 4,586 4,970 the use of alternative fuels rose to 5% of total energy needs required by the company.
Consensus 3,688 4,252
In addition to the production capacity expansion, SMGR also initiate to promote
EPS (Rp) production efficiency program. SMGR will change the composition of its coal power
AAA EPS 780 845 plant by convert the use of coal with high calorific value that has higher prices with
623 the use of coal with lower calories that spent cheaper price. Given the energy
Consensus EPS 718 component in the production is quite dominant, then the savings of low-calorie coal
use is expected to improve gross margins. Until now, the composition of high-calories
was at 75% compare to 25% of lower calories. Its composition will be changed to 50%:
50%, and will be a positive factor to manage energy cost. This efficiency will
ultimately strengthen the performance of financial in the future, especially due to
energy price volatility.
Outlook & valuation
The SMGR, Indonesian cement market share of 44%, supported by the spread of
factories in three different locations was become our consideration in recommending
company as an investment target. We're still going to review the fair valuation of the
current SMGR that has touched the previous price target at 10,000 level.

FINANCIAL SUMMARY
Key Ratio 2008 2009 2010F 2011F 2012F 2013F
Sales 12,210 14,388 16,301 18,470 20,926 20,926
EBITDA 7,168 8,787 10,020 11,135 12,498 12,498
Net profit 3,326 4,164 4,586 4,970 5,598 5,598
EBITDA (%) 33% 33% 39% 39% 33% 38%
Helmi Therik (ext 185) Net Margin (%) 21% 23% 26% 25% 21% 24%
Helmi.therik@aaasecurities.com ROAA (%) 26% 28% 27% 23% 26% 20%
PT. Andalan Artha Advisindo Sekuritas ROAE (%) 34% 36% 36% 33% 34% 30%
Equity Tower Building 22nd Floor
Jl. Jend. Sudirman Kav. 52 – 53 Source : Company, AAA Securities
Jakarta 12190
Ph : +62 21 2991 6600
Fax : +62 21 515 2644

PT Andalan Artha Advisindo Sekuritas 1

 COMPANY UPDATE INDONESIA
November 9, 2010 Research Division

Revenue Growth Consistent Operating Profit

20,000,000
18,469,525 12,000,000
11,134,853
18,000,000
16,301,434 10,019,923
16,000,000 10,000,000
14,387,850 8,787,320
14,000,000
12,209,846 8,000,000
7,168,436
12,000,000
Mn Rp

Mn Rp
9,600,801 5,959,269
10,000,000 6,000,000

8,000,000
4,000,000
6,000,000
4,000,000 2,000,000

2,000,000
0
0
2007 2008 2009 2010 2011
2007 2008 2009 2010 2011 EBITDA
Sales

Source: Company, AAAS

Strong debt repayment capacity Solid Financial Stability

Debt / EBITDA
0.80 Debt to equity (x)
0.5
0.71 0.5
0.70
0.5 0.4
0.62
0.60
0.4

0.50
0.45 0.4
0.41 0.3
0.40 0.37 0.3
0.3
0.3
0.30 0.3

0.20 0.2

0.10 0.2
2007 2008 2009 2010 2011

0.1
2007 2008 2009 2010F 2011F

Source: Company, AAAS

Cost Production Composition Profit Margin Improve

60%

Bahan Baku
6%
49%
50% 47% 48%
44%
42%
39%
40%
39%

33% 33%
34% 33%
30% 30%
28%
25%
26% 25%
23%
20%
18% 21%

Tenaga Kerja 10%

Gross Margins (%) Opr Margins (%)
& FOH(Beban EBITDA Margins (%) Net Margins (%)
Prod)
94% 0%
2007 2008 2009 2010 2011

Source: Bloomberg, AAAS

PT Andalan Artha Advisindo Sekuritas 2

 COMPANY UPDATE INDONESIA
November 9, 2010 Research Division

Interim. Performance 9M09 9M10 YoY 6M09 6M10 YoY 3M10 FY09 6M09 9M09 3M09
Dalam milyar Rp
Revenue 10,404 10,292 -1% 6,767 6,661 -2% 3,247 14,388 6,767 10,404 3,228
COGS 5,647 5,356 -5% 3,774 3,500 -7% 1,705 7,614 3,774 5,647 1,850
Gross profit 4,757 4,936 4% 2,993 3,161 6% 1,541 6,774 2,993 4,757 1,378
Operating profit 3,059 3,207 5% 1,914 2,050 7% 1,011 4,343 1,914 3,059 866
Net profit 2,408 2,522 5% 1,514 1,627 8% 802 3,326 1,514 2,408 681
Gross margin 46% 48% 44% 47% 47% 47% 44% 46% 43%
Operating margin 29% 31% 28% 31% 31% 30% 28% 29% 27%
Net profit margin 23% 25% 22% 24% 25% 23% 22% 23% 21%
Source : company, AAAS

Income statement Valuation

Year-end 31 Dec (Rp mn) 2007 2008 2009 2010F 2011F Year-end 31 Dec 2007 2008 2009 2010F 2011F
Sales 9,600,801 12,209,846 14,387,850 16,301,434 18,469,525 PER (x) 13.1 7.4 10.7 11.6 10.7
COGS 6,855,225 7,613,709 8,284,983 9,528,679 10,795,196 PBV (x) 4.1 2.4 3.5 3.5 2.9
Gross profit 5,354,621 6,774,141 8,016,451 8,940,845 10,130,775 EV/EBITDA (x) 7.7 3.6 5.7 5.4 4.7
EBITDA 5,959,269 7,168,436 8,787,320 10,019,923 11,134,853 EV/Sales (x) 3.2 1.7 2.9 2.9 2.6
Operating expense 1,967,435 2,431,578 2,465,482 2,835,586 3,212,482 Dividend yield (%) 3.59 3.62 3.27 3.60
Operating profit 3,387,186 4,342,563 5,550,969 6,105,259 6,918,293 Source: Company, AAA Securities

Pre-tax profit 3,589,529 4,655,188 5,821,661 6,412,077 6,948,969

Income tax - net 1,045,569 1,302,433 1,628,790 1,793,977 1,944,189
Minority interest 20,416 26,267 28,894 31,783 34,962 Cashflow analysis
Net profit 2,523,544 3,326,488 4,163,977 4,586,317 4,969,818 Year-end 31 Dec (Rp mn) 2007 2008 2009 2010F 2011F
EPS (Rp) 426.0 566.0 708.5 780.4 845.6 CFs from operation
Source: Company, AAA Securities Net profit 2,523,544 3,326,488 4,163,977 4,586,317
Depreciation/amortz. 604,649 394,295 770,868 1,079,078
Balance sheet Change in working capitals -246,391 -1,255,788 3,263,009 -188,009
As at 31 Dec (Rp mn) 2007 2008 2009 2010F 2011F CFs from operation 2,881,802 2,464,995 8,197,854 5,477,386
Assets
Cash and equiv 3,746,684 3,410,263 5,547,983 7,679,146 11,203,871 CFs from investments -876,875 -1,619,020 -4,316,856 -2,889,943
Receivables 1,518,940 1,439,816 1,884,248 2,134,852 2,418,788
Inventories 1,637,853 1,407,578 1,543,506 1,748,792 1,981,382 CFs from financing activities -1,080,523 -1,182,397 -1,743,279 -456,280
Others 179,944 1,949,384 915,613 910,443 908,964 Net inc/(dec) in cash 924,405 -336,421 2,137,719 2,131,164
Total current assets 7,083,421 8,207,041 9,891,349 12,473,234 16,513,005 Cash at end period 3,746,685 3,410,264 5,547,983 7,679,146
Net fixed assets 3,101,866 3,308,878 4,014,143 7,598,321 9,386,374 DPS (Rp) 1.0 2.0 3.0 4.0
Other assets 5,413,362 7,294,085 8,937,165 10,583,283 13,187,980 Source: Company, AAA Securities
Total assets 8,515,227 10,602,963 12,951,308 18,181,603 22,574,353
Key ratio analysis
Liabilities and equities Year-end 31 Dec 2007 2008 2009 2010F 2011F
Payables 517,744 805,152 776,209 861,224 861,224 Profitability
ST. debt and curr. maturity 75,812 93,707 91,483 43,926 296,517 Gross margin 42% 44% 47% 49% 48%
Other current liabilities 852,318 1,191,731 1,427,151 4,199,289 4,209,411 Operating margin 25% 28% 30% 34% 33%
LT. debt 126,078 156,821 107,380 90,824 1,514,510 EBITDA margin 25% 33% 33% 39% 39%
Other long term liabilities 1,669,562 2,272,428 2,525,834 5,349,114 5,645,502 Net Income margin 18% 21% 23% 26% 25%
Total Liabilities 1,795,640 2,429,249 2,633,214 5,439,938 7,160,012 ROAA 26% 28% 27% 23%
Minority Interest 92,324 104,129 120,415 120,415 120,416 ROAE 34% 36% 36% 33%
Shareholders' equity 6,627,263 8,069,586 10,197,679 12,621,250 15,293,925
BVPS (Rp) 1,362.2 1,735.1 2,147.5 2,602.3 3,095.0 Growth
Source: Company, AAA Securities Revenue 27% 18% 13% 13%
Operating Profit 41% 28% 28% 10%
EBITDA 49% 20% 23% 14%
Net Income 42% 32% 25% 10%

Solvability
Current ratio (x) 3.6 3.4 3.6 1.9 2.3
Quick ratio (x) 2.8 2.5 2.1 1.5 1.8
Debt to equity (x) 0.3 0.3 0.3 0.4 0.5
Interest cov. (x) 206.2 129.3 213.3 322.5 54.2
Source: Company, AAA Securities

PT Andalan Artha Advisindo Sekuritas 3

COMPANY UPDATE INDONESIA
November 9, 2010 Research Division

PT Andalan Artha Advisindo Sekuritas

(Member of Indonesia Stock Exchange)

General :+62-21-2991 6600

Investment Banking : +62-21-

Fixed Income Dealing :+62-21-

Equity Dealing :+62-21-
22/F Equity Tower Building
Jalan Jenderal Sudirman Kav. 52-53
Jakarta 12190, Indonesia
Facsimile:+62-21-5152644
E-mail: all_research@aaasecurities.com

Disclaimer: The information contained herein has been compiled from sources that we believe to be reliable. No warranty (express or implied) is made to
the accuracy or completeness of the information. All opinions and estimates included in this report constitute our judgment as of this date, without
regards to its fairness, and are subject to change without notice. This document has been prepared for general information only, without regards to the
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