• Semen Gresik (SMGR) posted a solid result in 1Q10 with net profit growing by 17.8% YoY to reach Rp802bn compared to Rp681bn in 1Q09. However, the company’s revenue was relatively flat as it was only up by 0.6% to Rp3.24tn vs. Rp3.22tn in 1Q09. This figure is relatively in-line with our estimation as the company’s revenue and net income accounted for 21% and 21.2% of our full year estimate.
• However on quarterly basis, reflecting performance of its peers, results came lower than 4Q09 achievement as sales volume in 4Q09 was exceptionally high and due to wet season in 1Q10. The company’s revenue and net income figure is down by 18.5% and 12.6%, respectively.
• During 1Q10, the company booked 12.4% YoY growth on domestic sales volume to reach 4.2mn tons while export sales remained low at only 30.3k tons or down by 86.0% YoY compared to 215.4k tons in 1Q09.
• The company’s margins in 1Q10 improved across the board as operating and net margin was up by 4.3% and 3.6% to 31.2% and 24.7%, respectively. While on quarterly basis, the company’s gross and operating margin was down by 3.2% and 1.1% due to a cash cost escalation in 1Q10 along with higher coal and oil price.
• Overall, Semen Gresik’s 1Q10 result was in-line with our estimate and we expect the next earning catalyst for the company will come from the 5% tax reduction as the company’s free float shares is above 40%. We maintain our Buy recommendation on the counter while SMGR is trading at 2010F PER of 12.8x and EV/EBITDA of 7.8x.
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