Indocement Tunggal Prakarsa (INTP IJ)

KTA from Concall: A More Promising Outlook

• Though the detailed scheme on 3mn housing is not yet clear, INTP believes the program may boost demand for both bag and bulk.
• IKN construction is still ongoing at a slower pace post- Aug 17^th ceremony, but other infra projects are still ongoing and pushing bulk sales vol.
• We reiterate BUY on INTP with a TP of Rp8,800. 3mn housing scheme should bring a brighter outlook on LT cement vol. demand.

3mn housings: beneficial for vol. demand, but the amount is not certain yet

Albeit the detailed scheme is not clear yet, INTP believes the 3mn housing program may boost industry vol. demand for both bag and bulk. Furthermore, if the housing is built in remote areas, there should even be more cement demand for facilities and road access that need to be built. INTP estimates that 2-3 tons/house of cement is needed for landed houses type 30, and an additional 1 ton/house if it is built using precast material. For apartments, INTP mentioned that ~20% of the budget is usually allocated for cement, vs. ~10% for landed housing.

Bulk demand still predominates overall sales volume

According to INTP, IKN construction is still ongoing, albeit at a slower pace post the Aug 17th ceremony. Nonetheless, other infra projects (i.e. MRT, LRT, toll roads) are still ongoing, thus pushing the bulk segment to grow (+31% yoy in Sep24). Meanwhile, the bag segment is slowing down (-4.9% yoy in Sep24) due to rising prices in 2Q-3Q24 by most players. Thus, INTP's bulk ratio to total sales rose to 34%-35% of total sales. On pricing, INTP indicated that they have increased the bulk price, but not by a large margin.

Other developments: increasing fighting brand and stabilizing raw material

Fighting brand to total bag sales is currently slightly above 20%, rising from 20% last year, as purchasing power has weakened and more people are less loyal to certain brands. Meanwhile, on raw material prices, the increase is not as steep as in 2Q24, due to the normalization of the USDIDR exchange rate. These two factors would have a slight negative impact on GPM likely in 3Q24E, although we believe it would be offset by rising prices on bag and the impact of higher volume growth.

Reiterate BUY on INTP; brighter long-term outlook for cement volume

We reiterate BUY on INTP with a TP of Rp8,800, and as our top pick in cement. INTP currently trades at US$95/t (-1.5 std dev of the 5-year mean). We continue to expect INTP to record in line 3Q24E results, as we observe better vol. growth and better ASP situation in 3Q24 compared to 1H24. We believe the 3mn housing program should bring a positive impact to cement sales vol., yet the actual amount would depend on the scheme and other variables (e.g., location, house spec, mix of landed/apartment/renovation, land procurement).

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