Indonesia cement companies are making a fortune. The top 3 cement companies control over 90% of the market means enormous pricing power. Operating margins are the highest in Asia. The key question to ask will be how sustainable is these margins? Looking at the industry dynamics where incremental (small) capacity addition is still from the top 3 players and demand steady as a base case scenario, cement companies will be able to enjoy an extended period of high profitability. It is important to note the biggest chunk of cement consumption is still from housing (where we think we are at the infancy of a structural bull market - record low interest rates, the absence of leverage, rapid urbanization, young population), blue-sky will be from the pick up from infrastructure investments as prioritized from President SBY's second term administration. Holcim will be the most leverage play of the three cement companies.
Key takeaways:
Indonesia’s third largest cement producer has turned the corner. Robust cashflow generation has enabled aggressive debt reduction and financial risk is rapidly diminishing. The company has been focusing on deleveraging last few years. With that behind, we now forecast net cash by 2012
Management is now shifting attention towards expansion with a new cement plant in East Java, the first since 1996. 1,8m tons by end of 2012.
Ultimately, the company aims to be a vertically integrated supplier of building materials.
We have revised earnings to account for these changes and our fair value is based on blended forward earnings. Tp Rp2.060
Tidak ada komentar:
Posting Komentar