24 June 2022
A number of pressures had to be faced by cement producers throughout 2015. Indonesia's economic growth and property slowed down, adding that government infrastructure projects have not been running optimally to suppress cement producers in 2015.
Cement consumption is one of the indicators to measure the pace of development in developing countries and economic growth. Based on cement consumption data has a positive correlation with economic growth. In the first half of 2015, economic growth was only 4.7 percent.
That gives speculation of bad hope for cement consumption. What's more, the slowing property sector is also affecting cement sales for housing construction.
"The property market grew more slowly in 2015 with previous years. With a macro background, it becomes an obstacle to cement consumption," wrote research by PT KDB Daewoo Securities Indonesia, which was quoted on Wednesday (26/8/2015).
The research also conveys conservative views on the development of government infrastructure projects. The realization of government budget spending is still minimal, making infrastructure spending targets difficult to achieve. However, infrastructure projects can only help the growth of cement consumption in the coming year.
The same thing is also mentioned in the research of PT Henan Putihrai. Cement demand is expected to grow just under 10 percent in 2015 from 59.9 million tonnes in 2014. Based on data from the Indonesian Cement Association (ASI), cement sales for the January-July 2015 period were recorded at 31.34 million tons. This sales volume decreased compared to the same period last year of around 32.69 million tons.
Not only that, domestic cement producers are now also getting fierce competition. Considering that there are a number of new cement producers entering Indonesia. It is estimated that there are about 10 new players who will enter. The new players include Siam Cement, Semen Merah Putih, Anhui Conch Cement, and others.
By looking at these conditions, PT KDB Daewoo Securities Indonesia provides underweight recommendations. This is against the backdrop of the Indonesian economy and the slowing property market has put pressure on cement consumers. Oil prices and the weakening rupiah exchange rate against the US dollar have also added to higher pressures. Looking at BI's middle rate data , rupiah depreciation was 12.77 percent to 14,067 on August 25, 2015.
When, the competition is also increasing because of the large number of newcomers. However, cement producers will get positive sentiment from the easing of down payments or loan-to-value and the million-house program which is expected to increase cement consumption.
Cement producers also get pressure when the government intervenes to reduce the selling price of cement, especially PT Semen Indonesia Tbk. The market also responded negatively to the government's intervention.
Government Infrastructure Project To Lift Indonesian Cement
Slowing macroeconomic conditions plus sluggish property growth also have an impact on the performance of PT Semen Indonesia Tbk (SMGR).
The company's sales volume is expected to decrease by 3 percent to approximately 12.34 million tons by June 2015. Cement sales fell due to a weakening in absorption due to projects not yet underway.
PT Semen Indonesia Tbk posted revenues down 1.9 percent to Rp 12.64 trillion during the first half of 2015 from the same period last year of around Rp 12.88 trillion. Net profit decreased by 20.64 percent to Rp 2.18 trillion.
PT Investa Saran Mandiri analyst Hans Kwee said the sluggish property development plus government infrastructure projects did not go quickly to suppress cement sales.
"The rupiah exchange rate weakening against the United States dollar also makes COGS tend to rise. Domestic gas prices are not falling but the exchange rate is weakening so the costs are rising. The selling price of cement in the market is falling," Hans said.
Meanwhile, PT MNC Securities analyst Sharlita Malik said that the infrastructure project was running slowly, making the growth of PT Semen Indonesia Tbk not optimal. However, the company benefited from the sale of its exports. "Export sales of PT Semen Indonesia Tbk are quite significant until June," said Sharlita.
Hans added that the demand for cement is likely to increase. This can happen if the government quickly realizes its infrastructure spending. This can have a positive impact on cement producers including PT Semen Indonesia Tbk.
Capital market observer Ellen May said that if the government's infrastructure projects are boosted in the next year, PT Semen Indonesia Tbk will have a positive impact.
The need for cement for infrastructure will increase, what else will state-owned enterprises get a share first. "PT Semen Indonesia Tbk will definitely be prioritized for demand because it is a state-owned company," ellen said.
However, seeing the economic slowdown that occurred, Hans estimated that the financial performance of PT Semen Indonesia Tbk was still depressed.
"Because there is an increase in cost indications, it is likely that profits will fall by 20 percent and revenues by about 5 percent in 2015," Hans said.
Stock Recommendations
Hans recommends accumulating shares of PT Semen Indonesia Tbk (SMGR) with a target price of Rp 12,500 by the end of 2015. Hans said that if the government's infrastructure projects run smoothly, will have a positive effect on PT Semen Indonesia Tbk in the future. Sharlita also recommended buying shares of PT Semen Indonesia Tbk.
At the close of stock trading on Tuesday, August 25, 2015, the share price of PT Semen Indonesia Tbk was in the range of Rp 7,700 per share.
Shares of PT Semen Indonesia Tbk (SMGR) plunged 56 percent from its highest peak in January 2015 at 16,475 to a low of the year at 7,200.
SOURCE : LIPUTAN6.COM
