Infrastructure development, especially in the nation’s capital, will support cement demand this year. At the same time, coal prices are sloping which could ease pressure from production costs.
In research dated 21 February 2023, Ciptadana Sekuritas analyst Muhammad Gibran, sees the relocation of Indonesia’s capital city from Jakarta to the archipelago in East Kalimantan as a transformative step for Indonesia’s long-term infrastructure and will bring new demand for the cement industry. Gibran has an overweight rating on cement sector stocks.
Meanwhile, falling coal prices are expected to cut production costs for some cement producers in 2023 and 2024.
Mining analyst Ciptadana Sekuritas projects the average coal price to fall to US$ 220 per tonne in 2023 and US$ 160 per tonne in 2024.
For this reason, the following are stock recommendations for issuers in the cement sector from several analysts that are worth watching. Check out the review.
- PT Indocement Tunggal Prakarsa Tbk (INTP)
Lower global coal prices will push INTP to achieve higher relative growth than its peers in the cement sector. This is due to INTP’s lower coal purchasing coverage at DMO price level.
The continued decline in coal prices should favour companies with lower coal consumption coverage at DMO prices such as Indocement.
INTP’s management targets to secure 50% of coal at DMO price for 2023. However, it is possible that the realisation of INTP’s DMO consumption achievement will be higher. In addition, INTP’s sales volume will be slightly above the industry sales estimate this year.
INTP’s cement sales will be driven by the consolidation of operations with Semen Bosowa which will result in an additional capacity of 3.5 million tonnes while strengthening market share in eastern Indonesia.
Recommendation: Buy
Target price : IDR 14,000 per share
Emma A. Fauni, Mirae Asset Sekuritas in research 30 March 2023
- PT Semen Indonesia Tbk (SMGR)
Despite demand contraction in 2022, SMGR is expected to optimise its sales to meet minimum production utilisation. SMGR’s sales volume is projected to rise to 41 million tonnes as it plans to recover its market share.
SMGR will focus on regaining the market share it lost last year, where the bagged cement segment will use a micro market approach strategy.
It plans to release new brands in certain areas with fierce competition such as West and East Java and South Sulawesi. In the bulk cement segment, SMGR will focus on maintaining its leadership in strategic government infrastructure projects such as the IKN project.
SMGR could record higher profit margin in 2023 as the risk of coal price fluctuation has been minimised by securing 100% of its coal supply at DMO price.
Recommendation: Buy
Target Price : IDR 9,200 per share
Limartha Adhiputra, UOB Kayhian Sekuritas in research 17 March 2023
- PT Semen Baturaja Tbk (SMBR)
In the first semester of 2022, SMBR managed to increase its market share to 33% in the South Sumatra region (Sumbagsel). SMBR still maintains its position as market leader in the region.
Recommendation: Speculative Buy
Target Price : IDR 366 per share
Ayu Dian, Research Analyst Reliance Sekuritas
- PT Cemindo Gemilang Tbk (CMNT)
Technically, the movement of CMNT shares at the close of trading on Thursday (6/4) was still above the MA60. However, it can be observed from the volume side, where it is still dominated by selling pressure. The movement of CMNT shares is expected to tend to correct, looking at the MACD and Stochastic indicators which are starting to move to the neutral area.
Recommendation: Buy on Weakness
Target Price : IDR 945 per share
Herditya Wicaksana, MNC Sekuritas
Source : kontan.co.id
