Indocement Tunggal Prakarsa

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Business Summary

Indocement produces cement products marketed under the brand name "Tiga Roda". In 2001, German based HeidelbergCement Group became Indocement’s majority shareholder. The HeidelbergCement Group is a world-class player in the field of cement, ready-mix concrete, aggregates and other downstream activities in more than 40 countries.

Indocement offers a diversified range of cement products which are sold under the “Tiga Roda” brand. These include Portland Composite Cement (PCC), Ordinary Portland Cement (Type I, Type II and Type V), Oil Well Cement, White Cement and White Mortar TR30. Indocement is Indonesia’s only producer of White Cement. PCC, which was introduced in 2005, currently accounts for the majority of the company’s sales volume. This cement uses a lower ratio of clinker substituting alternative materials, which helps to enhance durability and resistance to weather and chemical erosion. The use of alternative materials also lowers energy requirements and CO2 emissions.

Indocement has become a leading provider of bulk cement and Ready-Mix Concrete (RMC). This business line is promoted through the Indocement subsidiary Pionirbeton Industri, which also uses the “Tiga Roda” brand.

On 9 October 2013, Indocement started the development of Plant 14 in Citeureup (with installed design capacity of 4.4 million tons of cement per year). At the start of 2018, Indocement’s total installed design capacity was 24.9 million tons of cement per year, 4.4 million cubic meters of ready-mix concrete (RMC), with 40 batching plants and 648 mixer trucks, as well as 2.5 million tons of aggregates reserves. The company's market share in terms of cement sales in Indonesia is about 32 percent.

Indocement Tunggal Prakarsa's Operational Highlights:

	2014	2015	2016	2017	2018
Cement Production  in million tons	18.5	17.3	16.4	17.1
Cement Sales in million tons	18.7	17.1	16.4
Cement Export  in million tons	0.08	0.11	0.72

 

	2009	2010	2011	2012	2013
Cement Production  in million tons	11.8	12.9	15.4	18.0	17.8
Cement Sales in million tons				18.0	18.2
Cement Export  in million tons	1.6	1.0	0.6	0.1

^{Source: Indocement Tunggal Prakarsa Annual Report 2016}

Export volumes - traditionally a small portion of cement production - declined significantly in recent years as Indocement is more focused on meeting high domestic demand. To offset surges in production costs (in particular energy costs) the company has managed to gradually increase domestic selling prices. Domestic sales are dominated by bagged cement, which constitutes around 83 percent of total domestic sales volume, while the remaining 17 percent comes from sales of bulk cement.

By around 90 percent, cement sales are the largest contributor towards Indocement's revenues. The remainder comes from the RMC and aggregates businesses.

Financial Highlights Indocement Tunggal Prakarsa:

	2015	2016	2017	2018
Net Revenue	17,798	15,362	24,431
Gross Profit	7,909	6,331	5,008
Operating Income	5,057	3,645	1,875
EBITDA
Net Income	4,357	3,870	1,860
Total Assets	27,638	30,151	28,864
Total Liabilities	3,772	4,012	4,307
Earnings per share¹	1,183	1,051	505
Dividend per share¹	415	929

 

	2010	2011	2012	2013	2014
Net Revenue	11,138	13,888	17,290	18,691	19,996
Gross Profit	5,541	6,414	8,270	8,654	9,106
Operating Income	4,061	4,418	5,877	6,064	6,001
EBITDA	4,683	5,082	6,650
Net Income	3,225	3,602	4,763	5,012	5,293
Total Assets	15,346	18,151	22,755	26,607	28,885
Total Liabilities	2,246	2,418	3,336	3,630	4,308
Earnings per share¹	876	977	1,293	1,361	1,437
Dividend per share¹	225	263	450	1,350	415

^{in million IDR (rupiah), unless stated otherwise
¹ in IDR (rupiah)
Source: Indocement Tunggal Prakarsa, Annual Report 2017}

Due to the promising perspectives of the Indonesian cement sector, Indocement is currently investing in the construction of additional new cement mills in West Java, Central Java and one outside Java. The new cement plant in Citeureup (West Java), which will have a total production capacity of 4.4 million tons, is expected to be operational in the third quarter of 2015. The company is also preparing a feasibility study for two additional (greenfield) plants, one in Pati (Central Java) and another outside of Java. Each of these greenfield projects is designed to have an annual production capacity of 2.5 million tons. Taken together, it will push Indocement’s total annual production capacity to about 28 million tons from 18.6 million tons at end 2013. Indocement’s plants run at a utilization level of 97 percent.

Future Prospects of the Indonesian Cement Sector

Indonesia's cement sector has shown a steep increase in domestic cement production and consumption. This trend is estimated to continue for a number of reasons:

• Indonesia's current low per capita cement consumption
• The government's intention to ramp up much-needed infrastructure development
• An expanding middle class that gives rise to to new housing and real estate development
• Solid national economic conditions with annual GDP growth of plus 5 percent

What are issues that negatively affect the Indonesian cement sector?

• Infrastructure development is not reaching its full potential due to red tape, a weak legal system, and a lack of public and private funds
• International financial turmoil (USA and Europe) can influence Indonesia's economic growth, thus affecting domestic cement demand
• Recent central bank monetary tightening led to a cooling property market

Indocement Tunggal Prakarsa, Semen Indonesia, and Holcim Indonesia dominate Indonesia's cement sector. Click here for a detailed analysis of Indonesia's cement industry and market.

Projection Indocement Tunggal Prakarsa's Future Corporate Earnings:

	2018	2019	2020F	2021F	2022F
Net Revenue	15,190	15,939	14,196	15,031	16,913
EBITDA	2,006	3,198	2,519	2,878	3,422
Net Profit	1,146	1,835	1,312	1,536	2,110
P/E Ratio (x)	37.9	23.7	33.1	28.3	20.6
P/BV (x)	1.8	1.9	1.9	1.9	1.9
ROAA (%)	4.1	6.6	4.8	5.6	7.5

^{in billion IDR, unless otherwise stated
Source: Danareksa Sekuritas (25.09.2020)}