CIMB Sector Update – Cement

Maintain OUTPERFORM. We are raising our domestic sales volume growth forecast for Holcim from 9% to 12% for FY10 as the company sold 1.3m tonnes of cement domestically in 1Q10, making up 23% of our forecast, which is more than the historical 20-21%. This, along with a higher FY12 margin forecast, raises our FY10-12 earnings forecasts by 2-8%. Our DCF-based target price rises from Rp2,200 t Rp2,700 (WACC 12.6%). We maintain our OUTPERFORM call. Potential catalysts for the company include further margin upside and higher volume growth in 2H10.