Through the looking glass

Take a moment to observe your surroundings, can you spot three objects that are made of glass?

Whether you find yourself seated in your car, gazing out of an office window, or engrossed in this blog on your phone- chances are you are surrounded by glass.

This remarkably versatile material has woven itself into our everyday items, often without us even realizing it. With advancements in technology, glass has expanded its functionality, offering extensive array of uses.

Do you remember the movie Kingsman, where the lead character Eggsy, meets virtually with fellow Kingsman agents holographic figures through his glasses. How impressive is that!

While commercial glass may not have reached advanced stages just yet, the rapid progress in technology suggests that it could become widely accessible to the masses in the coming years.

Speaking of glass advancements, a week ago I just met the pioneer of glass industry in Indonesia, Asahimas (AMFG). Established as a joint venture between AGC and Rodamas, this partnership has solidified AMFG's position by creating a robust distribution network, fostering financial and operational synergy, as well as encouraging shared research and development.

Fun fact: 'float glass' got its name from its production process, where molten glass is floated on molten tin, which has a lower melting point. This technique ensures the sheet has consistent thickness and a perfectly flat surface.

Source: Company

Backed with advanced research team from Japan, AMFG concentrates on its specialized products to avoid price competition and generate higher profit margins. One of their recent development is Stopray glass- it offers high transparency for natural light while maximising energy savings from its thermal insulation performance.

In this eco-conscious era, AMFG rides the wave of green investment, as the government’s target to reduce the greenhouse gas (GHG) emissions by 29% from the 2030 baseline. Structures like the Wisma BCA Forest, Bandara Yogyakarta, and Plaza BP Jamsostek stand tall as prime examples of green-certified buildings supplied by AMFG.

Source: Sucor Sekuritas, various sources

Few of the upcoming projects in 2023 implementing green building concepts are PT Global Digital Niaga Tbk (BELI)’s largest warehouse, and Living world Grand Wisata mall owned by Kawan Lama Group and Sinar Mas Land.

Interestingly enough, ~70% of their float glass sales are attributed to residential homes. As indicated in our previous sales note, this segment is projected to expand alongside population growth and infrastructure development.

Furthermore, if you check the show units sold by property giants, there is a noticeable architectural shift towards incorporating more glass, both to enhance natural lighting and reduce electricity consumption, while also creating the illusion of spaciousness.

Source: Company, Various Sources

AMFG has successfully secured its position as a market leader in Indonesia, with a firm grip on 54% of the country's total float glass production capacity. In terms of sales volume in 2022, it outshone its competitors, holding a remarkable 54% market share for float glass and an astonishing 84% market share for safety glass, excluding the 10% imported products.

Source: Sucor Sekuritas, Company

When it comes to safety glass for automobile production, AMFG takes the wheel, supplying over 80% of the market in Indonesia. Renowned automobile manufacturers such as Toyota, Hyundai, and Mitsubishi rely on AMFG's high-quality safety glass for their vehicles. The total production of automobiles in 2022 surpassed a remarkable 1.4 million units, marking a 31% increase from the previous year, which translates to the increase of AMFG’s safety glass revenue by 25%.

AMFG is spearheading glass industry innovation and dominating the Indonesia market, yet it’s currently valued at multiple of 2.98x LTM EV/EBITDA, which is significantly lower than the average of 7.6x LTM EV/EBITDA for its domestic and regional peers.

Source: Sucor Sekuritas, Bloomberg

In conclusion, glass is all around us, sneaking into our lives with various usages. And hey, with the way technology is advancing, we might soon have glasses that let us chat with holographic secret agents, just like in Kingsman! AMFG strategy this year is to increase sales revenue by 10% through increasing sales volume by 4% and average selling price (ASP) by 6%. We’ll keep an eye on AMFG’s next transformation in glass industry and how it will affect their financial performance.

Read our full report here

Cheers,

Boris the Broker🐾

SucorSekuritas