JP Morgan - Semen Gresik: encouraging trend in 4Q09 results

Audited FY09 results in-line with the un-audited indications, but quarterly analysis shows encouraging trend. Consensus FY10 estimate looking conservative, stock is cheap on P/E and P/E relative to market.

>> Margin uplift: gross margin up to 50.6% from 48.5% in Q4, EBIT margin to 32.2% from 31.5%. JPMorgan’s EBIT margin forecast for FY10 is a conservative 29.7%, forecasting 11% EPS growth.

>> Average selling price up 7.4% qoq, total volume up 2%: ASP per ton came in at Rp809k, vs. last quarter of Rp754k. Export tonnage, where the ASP is smaller, is reduced to 170k tons from 464k tons. Sales proportion coming from Java, where the ex-factory price is lower due to lower transport cost, went up to 51% from 48% in 3Q09.

Bottom-line: SMGR looks attractive on 12.3x conservative FY10 EPS. BUY.