Jumat, 16 April 2010

Mandiri Sekuritas Cement sector: 1Q10 demand grew 17.7% yoy (Overweight)

􀂄 1Q10 domestic sales volume grew 17.7% yoy, very much higher compared with 2M10’s growth of some 13.3%. March domestic sales volume was up 27.0% yoy, which was supported by very strong growth in Java (+23.1% yoy). Meanwhile, export decreased further in March 38.9% mom.

􀂄 The above-mentioned suggests that cement producers reduced its proportion for export and allocated higher chunk to domestic market. This means that margins could go up further, ceteris paribus. SMGR posted the highest switch from export to domestic, as export volumes drop 85.9% yoy.

􀂄 Among the 3 biggest cement producers in the country, Holcim Indonesia posted the highest growth of 31.0% yoy, followed by Indocement of 21.2% yoy and Semen Gresik of only 12.4% yoy. A significant jump in Java was the main reason behind it, as the area contributes more than 50% of total production. We maintain Overweight on the sector, with INTP and SMCB as our top buy call.

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