• Semen Gresik has released its un-audited 9M09 result which came in slightly higher than our numbers on both financial and operational estimates. However, the company’s 9M09 profit was way above consensus estimate thus we believe there shall be an upgrade on consensus numbers in the future.
• During 9M09, Semen Gresik booked Rp10.4tn revenue, up by 18.3% YoY (+2.7% QoQ) compared to the same period last year of just Rp8.8tn and appeared to be in-line with consensus, accounting for 76.6% estimates, but above our expectation at 79.2% of our full year forecast. The increase in revenue was mainly due to 20.1% YoY increase in company’s average selling price despite 1.5% YoY decline in sales volume.
• The company’s 9M09 bottom line grew by 34.4% YoY (+5.9% QoQ) to reach Rp2.4tn compared to previous year achievement of Rp1.8tn. The figure beat consensus and our estimate, accounting for 82.8% of consensus and 79.2% of our full year estimates. We believe there should be an upgrade in consensus numbers in near future especially as we believe the company’s 4Q09 performance should be better than previous quarters on the back of increasing cement demand toward year end.
• Margins improved across the board as company’s gross, operating and net margins reached 45.7%, 29.4% and 23.1% as compared to previous years achievement of just 43.0%, 27.2% and 20.4%, respectively. This was mainly due to the 20.1% YoY hike in average selling price that outpaced the production cost increase of +14.4% YoY.
• Meanwhile on the operational side, Semen Gresik’s sales volume in 9M09 reached 12.9mn tons or down by 1.5% YoY, comprising a 12.4mn tons domestic sales (+0.2% YoY) and a 0.6mn tons export sales (-28.5% YoY). The company’s achievement during 9M09 outperformed the cement sector as the sector still experienced a 6.1% YoY decrease in total output and a 4.9% YoY decrease in domestic consumptions.
• Supported by strong growth from Eastern Indonesia market, SMGR’s domestic market share in 9M09 improved to 45.5% from 43.3% in 9M08. Meawhile, INTP and SMCB’s shares shrank to 29.7% and 13.2% from 32.5% and 14.2% in the same period last year.
• On a quarterly basis, Semen Gresik posted a relatively flat performance mainly impeded by the festive seasons during Sept ’09. The company booked a 3.9% QoQ increase in sales volume to 4.6mn tons, resulting in 2.7% QoQ growth in revenue to Rp3.6tn from Rp3.5tn in 2Q09. Nevertheless, the company booked higher net profit growth of 5.9% QoQ to Rp1.2tn on the back of decreasing production cost that translates into margin improvements.
• Going forward, we expect the company to post better performance during 4Q09 as we believe domestic cement consumption may pick up in 4Q09 on the back of lower mortgage rates, prolonged dry season and late disbursement of government infrastructure budget. In the mean time, we are still waiting for the Oct ’09 cement consumption data before re-visiting our assumptions.
• At current price, the company is trading at 2010F PER of 11.2x and EV/EBITDA of 6.6x. We maintain our Buy recommendation on the counter.
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