[Indonesia] May 30, 2023

Cement (Overweight/Maintain)
INTP gaining market share amidst weak April sales volume

Mirae Asset Sekuritas Indonesia

Emma A. Fauni emma.fauni@miraeasset.co.id

National sales volume
Weakness is largely expected, Java dragging down national sales volume
 National cement sales in April stood at 3.0mn tonnes (-31.0% YoY, -38.8% MoM), bringing 4M23 volume
at 17.3mn tonnes (-12.1% YoY). Java sees higher decline (-35.0% YoY, -42.9% MoM). Mid-Java, in
particular, witnessed an even deeper contraction (-26.8% YoY, -34.4% MoM). As of 4M23, the weakness
is mainly concentrated in Central Java (-26.6% YoY), attributable to the intense competition in the region.
In contrast, Banten and Yogyakarta witnessed comparatively milder declines in sales volume.
 Outside Java, especially eastern part of Indonesia, sees milder decline. Sales volume in East Indonesia
declined by -21.7% YoY and 28.0% MoM in April, bringing cumulative 4M23 decrease of only 6.4%.
Kalimantan and Nusa Tenggara even maintained flat sales volume. We expect Kalimantan to continue
to see higher sales volume this year, primarily driven by the ongoing construction of two smelter
projects in the region.
 Bag cement sales in April experienced the highest decline of 33.8% YoY and 41.2% MoM. The drop in
sales was further exacerbated by a 23.2% YoY decrease and a -32.2% MoM decrease in bulk cement
sales. This decline can be attributed to the extended ban on transport trucks on both toll and major
non-toll roads, which aimed to alleviate traffic congestion during the Eid al-Fitr homecoming period
lasting approximately two weeks. Consequently, the overall construction activities in Java were
adversely affected. Looking into 4M23 figure, the majority of the weakness was still driven by the decline
in bag cement sales, which experienced a decrease of 14.6% YoY (vs. 3.9% YoY decrease in bulk cement
sales).

INTP gaining market INTP’s outperformance is supported by strong outside Java sales
share  Despite weak national sales volume in 4M23 (-12.1% YoY), INTP managed to maintain a flat sales
volume (-0.1% YoY), implying an increase in market share by 3.3%. On the other hand, SMGR's domestic
sales volume declined slightly deeper than the industry (-13.0% YoY).
 INTP’s operational outperformance in 4M23 can be primarily attributed to the strong outside Java sales
which managed to grow by 33.4% YoY. Consequently, INTP experienced the highest market share gain
outside of Java, reaching 21.7% in Apr-23 (vs. 12.8% in Apr-22 and 19.8% in Mar-23). Conversely, its Java
sales volume declined by 13.4% YoY, which is mainly dragged down by the Central Java sales (-32.0%
YoY).

Recommendation Retain our Overweight rating on the sector

 We continue to expect that cement demand this year will grow at the range of flat to low single digit as
sales of bag cement is expected to remain sluggish. Now that Ramadhan and Eid al-Fitr period has
concluded, we anticipate a volume recovery starting from 2Q onwards. This recovery is expected to be
supported by the potential increased public spending ahead of the 2024 election, as well as the
accelerated pace of infrastructure and commercial construction projects, including the developments
associated with the new capital city in Kalimantan. Furthermore, we anticipate that the higher
infrastructure budget allocated by the government this year will serve as a catalyst for further growth
in bulk cement.
 We maintain Overweight on the sector as we believe, cement is one of the rising sector on top of the
normalization of energy commodity prices this year. We like both companies but INTP is our preferred
pick due to its potential higher catalyst growth relative to SMGR driven by higher coal procurement
secured at DMO price level compared to last year and INTP’s operational outperformance. INTP is
currently trading at 23F P/E and EV/EBITDA of 13.2x and 7.3x, respectively.
Key investment metrics
Market cap Current price Target price Upside P/E (x) EV/EBITDA (x) ROE (%)
Company Ticker Rating
(IDRbn) (IDR/share) (IDR/share) (%) FY23F FY24F FY23F FY24F FY23F FY24F
Semen Indonesia Tbk SMGR 39,834 Buy 5,900 8,700 47.5 13.2 12.4 6.0 5.5 6.0 6.2
Indocement Tunggal Prakarsa Tbk INTP 37,549 Buy 10,200 14,000 37.3 13.2 11.0 7.3 6.1 12.3 14.4
Source: Mirae Asset Sekuritas Indonesia Research

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
May 30, 2023 Cement

Table 1. National sales volume in April (mn tonnes)

Regions Apr-22 Mar-23 Apr-23 YoY (%) MoM (%) 4M22 4M23 YoY (%)
Java 2.2 2.5 1.4 -35.0 -42.9 10.2 8.7 -14.3
Jakarta 0.2 0.2 0.1 -32.0 -46.0 0.8 0.7 -13.0
Banten 0.2 0.3 0.1 -31.6 -44.7 1.0 1.0 -6.7
West Java 0.6 0.7 0.5 -25.0 -38.8 3.0 2.7 -11.4
Central Java 0.6 0.5 0.3 -45.1 -41.3 2.4 1.8 -26.6
Yogyakarta 0.1 0.1 0.0 -29.7 -42.6 0.3 0.3 -4.7
East Java 0.6 0.7 0.4 -38.2 -47.1 2.6 2.3 -10.6
Western Java 1.0 1.2 0.7 -27.6 -41.4 4.9 4.3 -10.7
Mid Java 0.6 0.6 0.4 -43.4 -41.4 2.7 2.1 -24.2

Outside Java 2.1 2.4 1.6 -26.8 -34.4 9.4 8.5 -9.7
Sumatera 0.9 1.0 0.7 -30.6 -37.6 4.3 3.8 -11.3
Kalimantan 0.3 0.4 0.2 -22.4 -35.3 1.3 1.3 -0.7
Sulawesi 0.5 0.5 0.3 -25.3 -29.0 2.2 1.8 -17.8
Nusa Tenggara 0.3 0.3 0.2 -24.3 -34.7 1.0 1.0 0.0
East Indonesia 0.2 0.2 0.1 -21.7 -28.0 0.7 0.7 -6.4

Indonesia 4.3 4.9 3.0 -31.0 -38.8 19.6 17.3 -12.1

Bag 3.2 3.6 2.1 -33.8 -41.2 14.7 12.5 -14.6
Bulk 1.2 1.3 0.9 -23.2 -32.2 4.9 4.7 -3.9
Source: Company data, Mirae Asset Sekuritas Indonesia Research

Table 2. INTP sales volume in April (mn tonnes)

Regions Apr-22 Mar-23 Apr-23 YoY (%) MoM (%) 4M22 4M23 YoY (%)
Java 0.7 0.8 0.5 -26.6 -39.2 3.4 3.0 -13.4
Jakarta 0.1 0.1 0.1 -26.0 -50.2 0.5 0.5 -2.9
Banten 0.1 0.1 0.1 -28.1 -42.6 0.5 0.4 -7.1
West Java 0.3 0.3 0.2 -19.5 -36.2 1.4 1.3 -8.5
Central Java 0.2 0.2 0.1 -33.0 -33.3 0.8 0.6 -32.5
Yogyakarta 0.0 0.0 0.0 -35.6 -44.4 0.1 0.0 -25.4
East Java 0.1 0.1 0.0 -40.1 -40.1 0.2 0.2 -5.4
Western Java 0.5 0.6 0.4 -22.6 -40.6 2.3 2.2 -7.1
Mid Java 0.2 0.2 0.1 -33.2 -34.2 0.9 0.6 -32.0

Outside Java 0.3 0.5 0.3 24.2 -28.4 1.4 1.8 33.4
Sumatera 0.1 0.1 0.1 3.0 -34.0 0.5 0.6 10.5
Kalimantan 0.1 0.1 0.1 -6.9 -37.2 0.3 0.3 5.5
Sulawesi 0.0 0.1 0.1 142.4 -8.6 0.2 0.4 86.4
Nusa Tenggara 0.1 0.1 0.1 12.5 -36.5 0.3 0.4 38.7
East Indonesia 0.0 0.0 0.0 60.3 -5.0 0.1 0.1 167.1

Indonesia 1.0 1.3 0.8 -12.3 -35.3 4.8 4.8 -0.1

M/S in Java 31.3 33.2 35.3 33.8 34.1
M/S outside Java 12.8 19.8 21.7 14.3 21.3
M/S in Indonesia 22.2 26.7 28.2 24.4 27.8
Source: Company data, Mirae Asset Sekuritas Indonesia Research

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Table 3. SMGR sales volume in April (mn tonnes)

Regions Apr-22 Mar-23 Apr-23 YoY (%) MoM (%) 4M22 4M23 YoY (%)
Indonesia facilities
Domestic 2.3 2.6 1.5 -36.1 -42.4 10.2 8.9 -13.0
Export 0.4 0.5 0.5 28.4 -3.3 1.7 2.1 29.2

Vietnam facilities
Domestic 0.1 0.1 0.1 -21.8 2.2 0.4 0.2 -39.0
Export 0.1 0.1 0.1 -35.7 -8.2 0.3 0.3 -4.6

Total Group 3.0 3.3 2.2 -26.7 -34.0 12.5 11.5 -8.0
Total export 0.5 0.6 0.6 13.7 -3.9 1.9 2.4 24.3

M/S in Indonesia 53.9 53.0 49.9 52.2 51.6

Source: Company data, Mirae Asset Sekuritas Indonesia Research

Figure 1. Production capacity across Indonesia

Source: Ministry of Industry, Mirae Asset Sekuritas Indonesia Research

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May 30, 2023 Cement

Figure 2. SMGR’s seasonal quarterly earnings Figure 3. INTP’s seasonal quarterly earnings

(%) 1Q 2Q 3Q 4Q (%) 1Q 2Q 3Q 4Q

100 100

30
80 80
49

60 60
35

40 40
36
14
20 20
6
21
10
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research

Figure 4. Global coal price Figure 5. ICE Newcastle coal futures

(USD/tonne) ICE Newcastle Coal prices Average yearly 155

500
458 150 Dec'23
147.2
400
145
378
300
140

200 135
-69% from
its peak
100 130

125
0
6/23 12/23 6/24 12/24 6/25 12/25 6/26 12/26 6/27 12/27 6/28 12/28
2019 2020 2021 2022 2023

Source: ICE-Futures Europe Commodities, Mirae Asset Sekuritas Indonesia Research Source: ICE-Futures Europe Commodities, Mirae Asset Sekuritas Indonesia Research

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May 30, 2023 Cement

Figure 6. State budget deficit to GDP ratio Figure 7. State budget allocation

(IDRbn) Budget deficit (L) Deficit to GDP (R) (%)

0 2.0

-200 0.0

-400 -2.0
-2.2
-2.9
-600 -4.0
-3.9
-4.6

-800 -6.0
-6.1

-1,000 -8.0
2019 2020 2021 2022F 2023F

Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research

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APPENDIX 1

Important Disclosures & Disclaimers

2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price
Indocement Tunggal Prakarsa (INTP IJ) 3/30/2023 Buy 14,000 9/14/2022 Trading Buy 11,500
3/9/2023 Buy 13,900 Semen Indonesia (SMGR IJ) 3/24/2023 Buy 8,700
12/1/2022 Buy 12,000 12/1/2022 Buy 10,800
10/11/2022 Buy 11,500 9/14/2022 Buy 10,700

(IDR) INTP Analyst's TP (IDR) SMGR Analyst's TP

16,000 14,000

14,000
11,000
12,000
8,000
10,000

8,000 5,000
May-21 May-22 May-23 May-21 May-22 May-23

Stock Ratings Industry Ratings

Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%

Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at PT Mirae Asset Sekuritas Indonesia, we may call a trading opportunity in case there is a technical or short-term
material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future
earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Disclosures
As of the publication date, PT Mirae Asset Sekuritas Indonesia and/or its affiliates do not have any special interest with the subject company and do not own 1% or
more of the subject company's shares outstanding.

Analyst Certification
Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible
for this report. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in
the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be
directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of PT Mirae Asset Sekuritas Indonesia,
the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional
equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason
to know of any actual, material conflict of interest of the Analyst or PT Mirae Asset Sekuritas Indonesia except as otherwise stated herein.

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