Weak 2017 Earnings
INTP recorded FY 2017 net income of IDR 1.86 trillion (-51.9%) (86% of our estimate, 90% of consensus). Revenue dropped 6.1% to IDR 14,4 tn from IDR 15.3 tn, triggered by freefall in Ready-Mix Concrete sales (-23.7%). Despite rising sales volume (+2.5%), revenue from cement dipped (-3.22%) as average selling price (ASP) was under pressure.
Meanwhile, cost of revenues increased by 4.3% to reach IDR 9.4 tn ending the consecutive decline in the past two years. As expected, the rise in fuel and power expenses represented the highest increase in cost of revenues (+15.77%). Nonetheless, looking from per ton perspective, COGS per tonne in fact decreased to IDR 555,000/tonne (-0.2%). Furthermore, similar trend could be seen in its operating expenses, where it grew by 14.1% to IDR 2.3 trillion and ended the successive decreases in the past two years. Significant increases could be found in Advertising and promotion account under selling expenses where it jumped by 173% to IDR 108 bn as INTP tried to increase customer base via promotion and end-user programs. Other operating expenses also soared by 177% to reach IDR 121 bn. As a result, we see margin compression with GPM down to 34.7% (vs 41.2% in FY16), OPM fell to 13% (vs 23.7%) and NPM was halved to 12.9% (vs 25.2%).