Mansek Semen Gresik:Thoroughly consider to increase its selling price (SMGR, Rp8,950,Neutral,TP:Rp9,400)

In yesterday ’s analyst meeting,SMGR indicated its attempt to slightly increase selling price in the past several months.Yet,they have to adjust back to its previous level given it lowered their market share.In other way, such upward adjustment was not followed by its competitors,in our view.

In terms of the de-bottlenecking process,the progress was still inline with their schedule.Considerably low sales volume in 1H10 was due to several maintenances activities.In 2H10,they could again increase its production level.Such bottlenecking and maintenances will reduce its cost/ton in near future.Despite the above mentioned condition,we view that selling price could still go up next year,once new electricity tariffs start to have an affect to all cement companies.Even without such increase,we believe margin could still be maintained or slightly increases due to the efficiencies
programs undertaken.The company is currently trading at PER10-11F of 14.2x-12.3x.

Mansek Semen Gresik:1H10 net profit grew 7.5%yoy,inline with consensus estimates (SMGR,Rp9,250,Neutral,TP:Rp9,400)

SMGR ’s 1H10 net profit grew 7.5%yoy,despite of lower revenue compared with 1H09 (-1.6%yoy)to only Rp6.7tn.In 1H10,domestic sales figure only grew by 4.0%yoy,whilst export dropped significantly,which brings total production growth of only 0.5%yoy.Given the fact,it suggests that there was no increase in the domestic average selling price.

Better gross margin due to several cost efficiencies amplify its bottom line level. Overall,SMGR ’s 1H10 result was still in-line with our and consensus estimates.SMGR is currently trading at PER10F of 14.7x (vs average peers of 14.8x)and EV/ton of US$295 (vs average peers of US$296).

Mansek Semen Gresik:1H10 net profit may grow 10-15%yoy (SMGR,Rp9,100, Neutral,TP:Rp9,400)

SMGR 1H10 net profit may grow 10-15%yoy following higher revenue of 7-9%yoy.SMGR ’s president director also reported that production volume increases by 4-5%yoy.The indicated top and bottom line figures reflect 1H10 revenue and net profit of Rp7.2-7.4tn and Rp1.66-1.74tn,respectively.

It also indicates that average selling price is slightly increased,thus reflecting better margins.It is inline with our forecast as it represents around 45-46%from FY10 target.The company is currently trading at PER10-11F of 14.5x-12.5x vs average industry of 17.0-14.4x.