Cement: 3Q24 preview: expanding volume, stabilizing ASP; Expect SMGR to miss, INTP to meet cons. forecast (NEUTRAL)

Stock Code	Last Price	Change	Change %
DCII	154.700	2.725	1,79%
DSSA	51.600	775	1,52%
RATU	6.400	325	5,35%
MLPT	26.550	300	1,14%
PACK	2.250	200	9,76%
KARW	2.010	175	9,54%
FORU	1.595	170	11,93%
ANTM	3.060	150	5,15%

Cement

3Q24 preview: expanding volume, stabilizing ASP; Expect SMGR to miss, INTP to meet cons. Forecast

We expect SMGR/ INTP 9M24F to reach 47%/63% of our estimate vs. 72%/65% seasonality, hence potential miss for SMGR but inline for INTP.
Sales volume expanded in 3Q24F vs. 1H24, and ASP is stabilizing with a noticeable rise in Sep24.
The 3mn housing program would be the blue-sky scenario for the cement industry; we maintain a Neutral rating on the sector for now.

3Q24 preview: expecting SMGR to miss, while INTP may meet cons. f’cast

We expect SMGR/INTP sales vol. to grow by 21%/35% qoq in 3Q24F, (-4%/+9% yoy in 9M24F; flattish yoy if we compare INTP ex-Grobogan), driven by the bulk segment (especially due to infrastructure) and cement seasonality (2H > 1H performance). Meanwhile, on ASP, we expect 0%/+1% qoq improvement for SMGR/INTP, as our price tracker indicates most of the recovery just happened in Sep24 and the impact of a bigger bulk portion on total sales. Overall, we expect INTP’s 3Q24F net profit to double on a qoq basis, whereas SMGR’s would recover from only Rp30bn in 2Q24 to Rp274bn in 3Q24F. Nevertheless, due to a very weak 1H24, SMGR/INTP 9M24F NP would still decline -55%/-20% yoy. Our 3Q24 estimation indicates SMGR would miss our and consensus estimates (at 47%/37% of FY24F respectively, vs. seasonality of 72%), whereas INTP may meet (63%/64% of ours/consensus estimates, vs. seasonality of 65%).

The blue-sky scenario: 3mn government housing program

As mentioned by several media outlets, the government is planning to continue the current 1mn housing program and extend the amount to 3mn housing. The scheme is not clear yet, but we believe it would be beneficial for the cement industry. The most optimistic scenario would be an additional ~1.9mn new housing from the current scheme, which could yield additional cement demand of 6-10mt/year on the industry level, assuming 3-5 ton of cement/house. This would translate into a 9-15% additional industry vol. demand per year. We estimate that for every 1% additional vol., SMGR/INTP’s net profit would increase by 7%/1%. However, our scenario numbers could differ if the 3mn housing scheme includes houses that will be under renovation (which implies less cement is needed), and the actual scheme of this housing program would determine whether bag or bulk would benefit (hence, the impact on ASP).

Maintain Neutral rating for the sector with INTP as top pick

We maintain our Neutral rating for the sector, with INTP remaining as our top pick. INTP has shown resilient volume and better price management despite volatility in industry-wide demand. We have a Buy rating for INTP with a DCF-based TP of Rp 8,800. INTP currently trades at an EV/t of US$95, -1.5 std dev of its mean. Meanwhile, we have a HOLD rating for SMGR with a TP of Rp4,100 (it currently also trades at EV/t of US$61, -1.5 std dev of its mean). Upside risks to our call: 1) Clarification of the 3mn housing scheme; 2) ASP stabilization continues. Downside risks: 1) Price war on fighting brand level; 2) Entry of new players into the market.

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