Facing Challenges Head-On
Key Takeaways :
▪️ SMGR recorded a revenue of IDR8.4tn in 1Q24, marking a contraction of -6.3% YoY (vs IDR8.9tn in FY22) and reflecting 21.3%/20.8% of MNCS/Consensus estimates. The net profit plummeted by -16.0% YoY to IDR472bn with NPM of 5.6%, reflecting 20.5%/17.6% of MNCS/Consensus target.
▪️ However, we estimate a probability that SMGR will cut its ASP due to declining volume, while supply may potentially increase with the new player entering Indonesian market (Hongshi Group). Therefore, we adjust our assumptions, with flat ASP (previously ~2%) and sales volume ranging within ~1.5-1.7% YoY in FY24E.
▪️ We change our recommendation rating from Buy to HOLD for SMGR. We believe that cement demand for SMGR will moderately and the uptrend of ASP will be limited. However, the main concern of oversupply is still intact. Thus, we give a HOLD recommendation with a target price (TP) of IDR4,000 per share for the next 12 months, indicating a potential upside of +6.4%. Our valuation implies 11.3x/10.6x of PE in FY24E/FY25F.
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