Indonesia Hard Hat, Solid 2M12 numbers, JP Morgan

Indonesia cement sales volume in 2M12 grew by 19% y/y. Indonesia
cement sales volume in 2M12 grew by 19% y/y to 8.2mn MT. February
demand looks firm, with cement sales volume of 4.1mn MT, flat m/m
and up by 24% y/y. All regions posted strong growth. Kalimantan area
showed the strongest growth, as its cement sales volume grew by 36%
y/y. Assuming no fuel subsidy removal, we view that Indonesia cement
consumption growth for FY12 would likely to be inline with our
forecast of 10% y/y growth.


 4Q11 numbers likely to be in-line. INTP and SMGR report their
earnings in the third week of March. As noted in our Indonesia Equity
Strategy: FY11 Earnings Preview (dated 12 February 2012), we expect
both SMGR and INTP to report in-line with consensus expectations. We
forecast INTP to generate 4Q11 earnings of Rp1tr, up by 21% y/y. We
estimate SMGR to generate 4Q11 earnings of Rp1.1tr, up by 18% y/y.
Risk on earnings would come from higher-than-expected costs, such as
salary or diesel fuel.

 ASP increase in the coming months? Our channel checks indicate that
SMGR has raised prices in some pockets of the region in Jan-Feb 2012,
while INTP has raised prices twice in July 2011 and December 2011.
The laggard on price increases has been SMCB, it raising prices by 2%
in 4Q11. We maintain our view that in the current environment, it would
be easier for cement companies to raise prices due to tightness in
capacity.

 Update on incoming competition. We view that there is low risk for
incoming competition to threaten the pricing power as new capacity
would likely come online only in FY14E-FY15E. Anhui Conh has
stated that it plans to build 1mn MT of capacity in South Kalimantan,
construction possibly to commence end-FY12E. Siam Cement plans to
build new capacity in West Java and it would be around 2mn MT.

Download file : Indonesia Hard Hat