Semen Indonesia (Persero) (SMGR IJ): Cementing the Precarious Foothold April 13, 2018 408

PT Semen Indonesia (Persero) Tbk (SMGR), a state-owned strategic cement holding company is the largest cement producer in Indonesia with 35.8 million tonnes installed capacity. Its factories and supporting facilities are stretched throughout the country making its products present in most parts of the archipelago. Under pressure from lower ASP and higher coal price, its FY17 net income declined by 55.5%. This year, we expect another solid domestic and export cement sales volume as the company capitalizes on the government infrastructure projects. We also predict the non-cement segment revenue to continue growing to sustain improved earnings performance next year. We reinitiate our coverage on SMGR with a BUY rating and target price of IDR 11,300/share.

New Plants

With the operation of the new Rembang factory in Central Java and Indarung VI factory in Padang, West Sumatera, SMGR’s installed production capacity has increased to 35.8 million tonnes. Furthermore, the company is currently building cement plants in Pidie, Aceh and Kupang to meet the demand in the area. The company also commissioned new grinding and packing plant in Cigading, Banten (2 million tpy). Then, PT Krakatau Semen Indonesia (JVC of SMGR and PT Krakatau Steel (Persero) Tbk) has started the operation of Ground Granulated Blast Furnace Slag (GGBS) Plant at the end of last year. GGBS is a mixed raw material for slag cement.

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