INTP: Normalized-margin year - Mandiri

INTP posted in-line with our and consensus FY2010 results. Net profit was Rp3.2tn (+17.4% yoy) with improvement in net margin to 29.0% (vs. FY09 26.0%). This came following relatively stable oil price last year, coupled with the Rupiah’s appreciation that slightly pushed down COGS/ton by 0.9%, amid +3% yoy top-line growth. We changed our assumption of 2011 Rp exchange rate, to sit along with our economist that sees it at an average Rp8,819/US$ from earlier Rp9,200/US$. This reduced FY11F COGS/ton increase to +15.0% (vs. our earlier estimate of +16.4%). However, as the FY10 top-line result came in low-base of our earlier forecast, this still resulted to minimal bottom line growth at 4.7%. Thus maintain Neutral on the stock. INTP currently trades at PE11F 17.3x and EV/ton US$325.

In-line results with improved margin. INTP recorded the highest-among-peers domestic sales growth last year, with +8.6% increase, or +2.3% above the industry. However, revenue was only up 3%, following steep decline in export sales by 37.1% yoy, along with flat retail price during the year (-0.1% yoy). Yet, thanks to relatively stable oil price and the Rupiah’s appreciation against the US$ that drove up FY10 gross profit by 8.5%, while COGS/ton was pushed down by 0.9%. This has also upshot the overall margins, with net margin at 29.0% (vs. FY09 26.0%).

Remained concern over continued higher commodity prices. During our brief chat following the recent analyst briefing, the management, however, still pointed out their concerns over continued higher commodity prices to date, including coal and oil. They concurred on the possibility for the COGS/ton hike that may reach up to 15-20%. Margin may slide, normalizing to be range of between 31-37% for EBITDA margin like in FY08. Yet, this is noted using BI’s average FX exchange rate guidance of Rp9,200/US$. Given the recent further Rupiah appreciation, we changed our view and to align with our economist that sees 2011 Rupiah to average Rp8,819/US$, hence resulted in lower COGS/ton hike to +15.0% (vs. earlier +16.4%). Nonetheless bottom line figure is still expected to experience minimal growth of 4.7%, given lower FY10 actual top-line figure and OPM than we earlier estimated. Meanwhile we didn’t change our assumption on sales and energy cost.

Maintain Neutral. Despite EPS growth was slightly dragged to 4.7% from 5.8%, we remain bullish on the industry growth post 2012, at least up to the election in 2014, that should impact positively to the company. However, currently we maintain Neutral stance on INTP. Although, we are still looking forward to the company’s efforts in further expanding its sales and continued efficiency of its cost, not to mention clinker ratio reduction. INTP currently trades at PE11F 17.3x and EV/ton US$325.