Last Sunday, the State Palace looked stunning as it welcomed the new President.
Several buildings and supporting facilities got a fresh makeover.
From cleaning the fans and repainting the walls to replacing some of the tiles, everything was polished to perfection.
Speaking of tiles, the Indonesian government has officially imposed anti-dumping duties on ceramic tile imports from China.
The rates are no joke, ranging from IDR 13,446/m² to IDR 94,54/m², depending on the company.
Overall, these duties hit 35% to 50%, which is significantly higher than the previous safeguard duties of just 13% to 23%.
However, it still falls short of the expectations from ASAKI. Despite the rates not meeting their hopes, ASAKI remains optimistic.
They expect this policy to give a big boost to local ceramic producers, with domestic production utilization, currently at 63%, projected to rise to 67% to 68% by the end of 2024.
If everything goes according to plan, the local ceramic industry, especially ARNA, could become stronger and less dependent on imports.
Aside from the tariff, there’s another interesting point about ceramic tile imports from China.
According to ASAKI, the average purchase price of imported tiles from China is estimated at around IDR 37,000/m².
Meanwhile, the ASP in the local market is around IDR 60,000/m².
With this price gap, importers could previously enjoy a decent margin of around IDR 23,000/m².
However, with the new anti-dumping duty starting at around IDR 14,000/m², importers won’t be able to relax if they want to maintain the same margin.
Like it or not, their import selling price will have to increase to around IDR 74,000/m².
This is interesting because the selling price of imported tiles is about to match ARNA's white body tile ASP, which is already at IDR 75,000/m².
In fact, that price is even higher than ARNA’s Nusantara product line, which was launched last year at around IDR 68,000/m² to compete with imported products.
What’s even more intriguing is that most of the imports from China are polished porcelain tiles, which are actually of lower quality compared to ARNA’s glazed porcelain tiles.
So, if the price of imports continues to rise, competition in the market could become healthier.
This clearly presents a great opportunity for ARNA, especially with their additional production capacity, which is expected to increase by 10 million sqm by 2025-2026.
For ARNA, this is like a green light to boost their white body tile sales, as imported prices are no longer significantly lower than local products, which offer better quality.
Speaking of ARNA, we expect their 3Q24 sales to outperform both the previous quarter and last year.
One key driver is the huge success of their new product, UNO Rectified, which was launched in 1Q24.
This product has added fresh excitement to the market and accelerated sales growth.
With all these developments, we remain confident that ARNA's revenue will reach IDR 439 bn in 2024 and even increase further to IDR 463 bn in 2025.
What makes ARNA even more attractive is that they’re one of the biggest beneficiaries of the anti-dumping duty policy, thanks to their smart move into the white body tile market, combined with their strong financial position.
And let’s not forget, ARNA has a solid track record of paying dividends consistently, with a payout ratio of around 70%.
So, for those looking for an investment with attractive returns, ARNA could be a great option.
By 2025F, they’re expected to offer a yield of around 6% at the current price.
We remain highly confident in ARNA and continue to recommend a BUY, with a target price of IDR 880 based on DCF calculations.
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