Credit Suisse CEMENT SECTOR: June sales showed moderation – reit Top Buy SMGR

June SMGR sales showed a blip (-8% YoY in June while +5% MoM) as a result of expected 1 month plant maintenance. Arief reiterates SMGR as Top-Buy in cement sector and Indonesia market!


Arief Wana : Moderating is a trend in Indonesia’s June cement sales, posting the lowest YoY growth (flat YoY) in the past nine months to 3.4 mn tonnes. This is in line with our expectations (47% of FY10E), as we expect 2H10 to grow 4-5% to reach our 8% industry growth.

Despite a YoY decline, Semen Gresik’s market share improved in June but on a YTD basis, the negative impact from the plants’ repair and maintenance and capacity constraints overall was still apparent.

Cement prices were relatively flat on both MoM but some non- Java areas recorded YoY declines (due to higher sales mix from Indocement and Holcim going into Semen Gresik’s stronghold at lower ASP.

Indonesian cement sector continues to serve as a hedge against inflation. Our top pick is Semen Gresik, and we remain NEUTRAL on the other two stocks due to valuations.