Bleaker outlook
January domestic sales volume was low at 382k tons (-12.0% yoy or –11.8% mom). Given such condition, we trimmed our total volume forecast for FY09F to 6.0mn tons (from previously 6.6mn tons), or equal to 5.3% yoy decline. It is in line with the company’s FY09F outlook, as they expect domestic consumption to be flat or may even lower from the FY08 figure of approximately 6.9mn tons. Price-wise, they will try to maintain it at the current level of around Rp50k/bag, as was indicated in our recent pep talk. Given such outlook, they may defer their plan to build a new plant in Tuban this year. Our new assumptions resulted in lower DCF-based target price of Rp450/share vs previously Rp675/share. We therefore downgraded our recommendation to Sell from Neutral.
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