Cement companies are setting optimistic targets this year. A number of projects and development plans will drive sales this year.
Most recently, PT Solusi Bangun Indonesia Tbk (SMCB) projects sales volume growth in the range of 2% to 4% this year.
SMCB President Director Lilik Unggul Raharjo assessed that the domestic cement market is still haunted by the problem of oversupply.
He said, of the 119 million tonnes of installed factory capacity throughout Indonesia, only 63 million tonnes or equivalent to 52% were absorbed last year. SMCB’s utilisation rate is above domestic utilisation, which is 70%.
In comparison, SMCB booked cement and slag sales volume of 13.14 million tonnes throughout 2022. This realisation decreased by 2.32% from 2021 sales of 13.45 million tonnes.
Meanwhile, as of the first quarter of 2023, SMCB recorded sales volume of 3.14 million tonnes or 8% lower than the sales realisation in the first quarter of 2022 which reached 3.38 million tonnes.
On the other hand, the performance of PT Indocement Tunggal Prakarsa Tbk (INTP) improved.
Indocement Director and Corporate Secretary Antonius Marcos said that INTP’s sales volume in the first three months of 2023 was 3% higher than the same period last year, in which INTP sold 4.1 million tonnes of cement.
The factors that drove the increase in sales included improved public optimism along with the easing of the Covid 19 pandemic.
The increase in sales volume was accompanied by the average selling price of cement which was also better than last period. In line, INTP’s market share in Eastern Indonesia has also increased.
‘So far (sales) are still in line with the target,’ said Marcos.
The Tiga Roda brand cement producer is targeting sales growth of 2% to 4% for this year. The figure is in line with the estimated growth of national domestic cement sales.
Samuel Sekuritas Indonesia analyst Daniel Aditya Widjaja said, if we look at historical data, cement sales volume in the first semester will usually be lower than the second semester.
The lower sales volume is due to the rainy season and the Ramadan holiday period. Since 2018, domestic sales in the first and second quarters only accounted for 20% to 23% of the annual sales volume.
Cement sales usually start to pick up in the third quarter with an average sales volume increase of 30.4%.
Daniel sees another potential catalyst to boost cement sales, which is the momentum of the general election to be held in the first quarter of 2024.
The election will encourage increased demand and purchasing power, especially in the retail market (bagged cement).
After experiencing a difficult period at the beginning of the year, the recovery of cement sales has begun to be seen, especially in the first week of May 2023 after the Eid holiday.
Daniel sees that cement sales volume will continue to increase until the fourth quarter of 2023 with the catalyst of the construction of the new capital in Kalimantan, which is reflected in sales growth in areas outside Java that continue to record fantastic performance.
‘We maintain our projection for national cement sales volume to grow 2%-3% year-on-year (YoY) in 2023,’ said Daniel on Friday (19/5).
Ciptadana Sekuritas Asia analyst Muhammad Gibran said the cement industry is also supported by the decline in coal prices, which is one of the biggest contributors to production costs.
The decline in coal prices is expected to cut the production costs of several cement producers this year and next year.
As projected by Ciptadana Sekuritas, the average coal price is projected to decline to US$ 220 per tonne in 2023 and US$ 160 per tonne in 2024. The decline in thermal coal prices is expected to ease fuel costs for cement producers.
Ciptadana Sekuritas Asia raised its rating on the cement sector from neutral to Overweight in line with expectations of improving demand and the issuer’s net profit prospects.
Gibran made PT Semen Indonesia Tbk (SMGR) his top picks because the state-owned company has solid pricing power, supported by market dominance and cost reduction from lower coal prices. He recommends buying SMGR with a target price of IDR 9,400.
In addition, INTP is also considered attractive due to its initiatives in cost efficiency and solid balance sheet position. He gave INTP a buy rating with a target price of IDR 12,500.
Meanwhile, Samuel Sekuritas affirmed a neutral rating for the cement sector with a recommendation to buy SMGR shares with a target price of IDR 7,630 and buy INTP with a target price of IDR 12,200.
However, the main risks of this recommendation are declining cement demand and rising distribution costs.
Source : kontan.co.id
