Semen Gresik: SMGR FY2010 results in line with our (100.2%) and consensus (101.6%) (SMGR, Rp8,500, Neutral, TP: Rp8,800) - Mandiri Sekuritas

 SMGR reported earnings in-line with our (102.1%) and consensus (101.6%) of its FY2010 results to Rp3.6tn or 9.2% yoy. The bottom line improvement was much helped by reduction of its cost, seen from slight pick-up of its GPM to 47.5% (vs. FY09 47.1%), amid slight decline in revenue by -0.3% to Rp14.3tn. Given improvement of its total production sales by 0.9%, negative revenue figure suggested lower average selling price sold by the company over last year. However this makes sense, looking at constraint of its spare production capacity that led them to fight in selling price to be able to maintain its sales.
 In the mean time, Opex was also managed to be pushed down by -4.5% yoy, therefore operating profit was improved by +3.4% that supported by lower income tax expense (-18.3% to Rp1.1tn), hence offered higher improvement in the bottom line.
 Although SMGR may receive the least impact from continued coal price increase this year, we are still concerned by the possibility of the removing of the tariff capping by PLN that may result to up to 40% hike in electricity costs. While additional production capacity is minimal, we see lower EPS growth of only 4.2% growth in 2011. Our DCF fair value calculation arrived at Rp8,800/share, thus maintain Neutral on the stock. SMGR currently trades at PE11F 13.5x and EV/ton11F US$267.