INTP – INDOCEMENT TUNGGAL PRAKARSA TBK

Cement Industry Analysis

Large infrastructure project is expected to start in 2015

Government plans to start many projects infrastructure product in building road, harbor, air port, rail and etc. The demand of cement product and its diversified product such as ready mix concrete are predicted lifting up. As the allocation of fuel subsidy in to productive sector, the infrastructure project is expected to support economic growth in 2015. Furthermore, the target of economic growth will be able to be reached in 2015.

CAGR of domestic demand for cement in 2003- 2014 is at 7.6 % , this sector is considered growing sharply in 2015 as the government has allocated its subsidy for infrastructure project.

The capacity in domestic in 2014 is at 73 million tons, mean while the domestic demand in the same year is at 64.3 million tons. The producer could increase its production until at 73 million tons (full capacity) or up 14 %.

The increase of domestic demand in 2014 is at 4.5 % up than 2013. According to the data the capacity grows steady annually. In between 2013-2014, the domestic capacity advanced at 7.35 %.

The highest growth in the last five years is at 2010 in to 2011, which is at 17.6 % up. If the domestic demand in 2015 is 17 %, the government should import cement from oversea to fulfill the lack of domestic capacity.

The challenge is about land acquisition and its project execution; those could be a bottle neck for the implementation in 2015.

Financial Analysis

Strong in liquidity and High interest coverage

The company is a part of Heidelberg cement group; it owns 51 % of total share. Others share holders are salim group with 13 % of total share and public.

There is no doubtful thing in its financial ratios; the company has strong liquidity ratio, steady gross margin and stable revenue growth.

In 2013, the revenue increases about 8 % compared to 2012. Moreover, there is an improvement in its activity ratio at 2013, the days receivable, days payable and days inventory are faster than 2012. the company is able to get the payment from the buyer with shorter time.

Key driver of its revenue in 2013 is cement product with 86 % revenue contribution. The domestic market is dominated as mainly income which is about 90 % of total revenue. 

The company has high cash to sales ratio, which means it actually is able to allocate its fund more in investment of fixed asset to advance its capacity. Although it had done projects in expand its capacity at 2014, these consist of new mill in citeureup and Cirebon.

The future project is at north Sumatra, citeureup and central java, this consists of green field and brown field.  The projects will be started in 2018.

The company would like to enhance its efficiency in operational cost and manufacturing cost by decrease the clinker in cement production with new equipment in its production process such as usage of new vertical raw mill with lower clinker ratio.

Forecast

The revenue increase of 2014 is forecasted at 8 % up. CAGR of revenue growth in the last five years is at 12 %, the forecasted growth is taken below the CAGR because there will be some stumbles in project financing of the contractor as the bank reduces its credit, land acquisition, bureaucracy in project assessment and etc.

The revenue in 2016 may possibly climb sharply in 2016, but the worst scenario is taken because the parliament is still dominated by the opposite group. Government ought to establish good relationship with parliament to make politic situation stable.