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Strong Base Builders

This year, we've talked about the property sector multiple times, but there's one fundamental element we often overlook: cement. Behind the towering skyscrapers and cozy homes lies a crucial material in the construction process—cement.

One of our top picks in the cement industry is INTP. Let's dive into it.

INTP's sales data shows a positive growth trend. In May 2024, sales volume increased by 21.4% yoy. Total sales volume for 5M24 reached 6.7 mn tons, up 10.2% yoy.

Source: Sucor Research

INTP continues to showcase its excellence through strategic and measured steps. One of the big moves they've recently made is the acquisition of Semen Grobogan

With this acquisition, INTP not only strengthens its position in the national cement market but also paves the way for a brighter and more efficient future.

The sharp growth in Java, particularly in Central Java and Yogyakarta, is largely driven by the Grobogan acquisition, which has now become a key driver for INTP's market share growth.

Source: Sucor Research

The Grobogan plant, with a production capacity of 2.5 mn tons, now contributes about 10% of INTP's total capacity

This allows INTP to expand its presence in Central Java and Yogyakarta, regions showing significant industry growth.

The integration with Semen Grobogan not only boosts production capacity but also provides significant cost efficiencies. 

The strategically located Grobogan plant, close to key markets in Central Java, allows INTP to reduce overall logistics costs. This means improved profit margins, positively contributing to the company's net profit.

Source: Sucor Research

After a major acquisition, the company has maintained a net cash position with a net cash-to-equity ratio of 0.02x in 2023, compared to 0.2x in 2022.

Source: Sucor Research

A healthy financial structure and strong cash flow allow INTP to maintain a high dividend payout ratio.

Our analyst projects  payout ratio to gradually return to 100% throughout the next 3-5 years, with a conservative estimate of 50% for 2024-2025, implying a 5% dividend yield.

Looking ahead, our analyst projects INTP to achieve a 6% CAGR in earnings over the next five years. Stable volume growth is expected at a 5% CAGR, with net profit reaching IDR 2.1 tn in 2025, growing 6.4% yoy.

 Source: Sucor Research

Gross margin and EBITDA are expected to remain stable at 33.0% and 10.5%, respectively.

 Source: Sucor Research

With strong volume growth performance, positive synergies from the new acquisition, and a healthy balance sheet, we recommend a BUY with a target price of IDR 8,900.


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