Timah posted 1Q10 net income of Rp142bn (+885%yoy, -0.7%qoq). This figure is below our and consensus estimate (12% of FY10F).
YoY improvement was mainly due to rising ASP by 56%yoy while sales volume declined by 11%yoy.
QoQ sales declined by 24%yoy as the company can not fulfilled sales order in 1Q10. However, the sales order will be fulfilled in 2Q10, so that we expect earnings jump in 2Q10. The size of the pending sales order is around 25% of 1Q10 actual sales.
In term of profitability margin, the qoq improvement was not as high as our and consensus expectation as monsoon was longer than expected so that offshore mining contributed less than expected. Rupiah appreciation also hurt the company as its sales are 95% exports, and it has net monetary assets in US$. However, our economist estimate that Rupiah appreciation is very limited at current price, therefore, further deterioration due to forex loss is small.
We expect improvement in the rest quarters. We still maintain our Buy recommendation on TINS which currently is trading at PER10-11F of 11.7x-7.8x.
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