Holcim Indo, Strong momentum, CLSA

Holcim has excess capacity this year to grab market share; we expect
11% YoY sales growth in FY12/14; 2M12 sales grew a strong 26.8% YoY
vs 19.4% of market, at 16% of our FY expectation. We raised our ASP
growth assumption to 4% which will enable stable margin this year. The
company’s balance sheet is getting stronger, and should be moving into a
net cash position in 2014; even with US$325m capex expansion for 2013-
16. Holcim trades at a very attractive valuation vs peers. BUY.


Excess capacity to grab market share
As with INTP, Holcim also has excess capacity to grab market share this year.
We expect FY12/13 sales to grow 11% YoY; 2M12 sales grew 26.8% YoY, vs
19.4% of market, at 16% of our 12CL (at 93% utilization rate). There is
upside to our FY13 growth assumption given 1.7m tonnes additional capacity
will come. Holcim will also expand capacity again in 2016 to meet demand.

Increasing ASP to maintain margin
We raised our ASP growth assumption to 4% from 3% previously, which will
more than offset higher energy costs. The delay of electricity tariff hike
provides some relief to cost pressure. With this, we expect GP margin to
contract slightly to 37.5% in FY12, vs 37.9% in 2011, and to rise to 38% in
FY13. We have also factored in higher subsidized fuel price (mainly affecting
transportation cost, part of selling expenses).

Balance sheet to support growth
2011 net gearing declined to 5% from 52% in 2009, as a result of capital
restructuring in 2010. Holcim is sitting on US$120m cash and US$160m
debt. Wew expect the company to generate US$250m yearly operating cash
flow ex-dividend, which should be enough to fund capex expansion of
US$325m for 2013-16. The company can move into a net cash position very
shortly (2014), enabling it to expand more.

BUY with 24% upside to TP
We maintain our positive outlook on Indo cement sector. Indo is moving up
the curve in cement consumption and GDP/capita. We tweaked our profit
forecasts for Holcim by ~10-11%% for FY12/13, and raised TP to Rp3,200.
Future demand upside will come from multiplier effect from more infra
development in the country. Holcim trades at 15.3x PE12 (12% discount to
SMGR, at par with regional peers), and a very attractive 7.7x EV/EBITDA vs.
regional peers ave at 11.4x.

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