CIMB Semen Gresik Result note - Defiant selling prices

(SMGR IJ / SMGR.JK, OUTPERFORM - Upgraded, Rp3,975 - Tgt. Rp4,800, Construction and Materials)

We upgrade Semen Gresik to Outperform from Neutral as we believe consensus upgrades are likely following better-than-expected 1Q09 results. Higher-than-expected ASPs were the positive surprise, while consensus was expecting ASP declines. Management wants to maintain the company's 1Q09 ASP throughout the year and at least a 30% EBITDA margin, but this would hinge on the profitability and behaviour of peers, in our view. Adjusting for 1Q09 ASP and costs, our FY09-11 EPS estimates have been raised by 3-11% and our target price, to Rp4,800 from Rp4,650 (still based on US$125 EV/tonne), on higher net-cash expectations.