CIMB Cement Sector Note - Seeing catalysts

Cement Sector Note - Seeing catalysts - by Rania Rahmundita

We upgrade the Indonesian cement sector to Overweight from Neutral on the back of: 1) a stabilising rupiah and subsiding risk premium; 2) our belief that domestic demand could recover in 2H09; and 3) domestic price strength, thanks to a higher level of domestic utilisation. We increase our target prices for our cement stocks, now based on US$125 EV/tonne, the mid-cycle valuation, from US$100 EV/tonne. Looking ahead into 2H09, we expect Java to rebound and favour Indocement as our top pick. We also upgrade Holcim to Trading Buy from Neutral as it has been a laggard and for its high beta.