PT Indocement Tunggal Prakarsa Tbk 2010 Financial Update: Better 4Q10 Performance - Lautandhana Securindo

Highlight Events
§ Indocement has released its audited FY10 financial report, where the company’s revenue grew by 5.3% YoY reached to Rp 11.14 trillion vs Rp 10.58 trillion in FY09. Meanwhile, net profit climbed by 17.4% YoY from Rp 2.75 trillion to Rp 3.22 trillion.

§ On quarterly basis, the company’s revenue also grew by 10.3% QoQ attained to Rp 3.03 trillion from Rp 2.75 trillion in 3Q10. Gross profit and EBITDA also increased by 9.4% QoQ and 10.6% QoQ, respectively, while net profit jumped by 13.3% QoQ.

§ In 2011, Indocement will start to construct a new cement mill (located in Citeureup plant) with capacity of 2 million tones p.a. and is expected to commence operation in 2012/2013. The new cement mill will increase the total cement capacity by 10.8% to a total of 20.6 million tones p.a. from the current capacity of 18.6 million tones p.a.


Comments
§ Indocement profitability looked superior in yearly basis, thanks to lower production cost and an efficient distribution cost due to concentrated selling coverage area. Operating and EBITDA margins climbed by 117 bps and 136 bps, respectively. Meanwhile, net profit margin was recorded at 29% in FY10 on the back of an increase in interest income, lower interest expenses, forex gains and tax cut rate.

§ COGS per ton decreased by 0.9% YoY (Rp 403 k in FY10 vs Rp 406 k in FY09), thanks to Rupiah appreciation in 2010 since around 60% of the production cost are US$ based.

§ Indocement has no difficulty to finance their expansion, backed by stronger balance sheet. As of 2010, the company maintained its net cash position while debt equity ratio tumbled to 2.8% from 3.2%. Meanwhile, its internal cash soared by 78.6% YoY reached to Rp 4.68 trillion vs Rp 2.62 trillion in FY09.

§ Based on FY2010 result, we revised our financial projection to reflect a more conservative average selling price assumption. For FY2011, we expect the revenue to grow by 11.3% YoY to Rp 12.40 trillion and net profit is projected to reach Rp 3.56 trillion (+10.4% YoY), backed by interest income growth, lower interest expenses and further tax cut rate (25% in FY11 vs 28% in FY10).


Recommendation
§ Based on our new forecast estimates, our new DCF valuation (WACC of 12.1%), results in a lower equity value of Rp 18,500 per share from previous value of Rp21,350 per share. The new target price represents PER of 19.13x FY2011 and PBV of 4.35x FY2011. Currently, the counter is traded at FY11 PER of 15.51x and PBV of 3.53x, therefore our target price offered 23% upside. STILL A BUY.