DAILY INSIGHTS EQUITY RESEARCH

Friday, 29 February 2008 CEMENT SECTOR/COMPANY UPDATE

BUY
Maintain

Price Rp5,800
Indocement Tunggal Prakasa
Target Price Rp9,000
Unchange FY07 results above expectations
Reuters Code INTP.JK
Bloomberg Code INTP IJ Above expectations
No. of shares (mn) 3,681 Indocement has booked net profits of Rp982bn (+65.7% yoy) in FY07, or higher than our
Market cap (Rp bn) 21,350 expectations due to a stronger top line. We retain our positive view on the company, especially
(US$ mn) 2,304 with its strategy of increasing sales to Java, an area that is now seeing demand recovery. Moreover,
Weight in JCI (%) 1.3 based on the results, Indocement has demonstrated its production efficiency by boosting its
3mo. Avg. daily T/O (US$ mn) 1.4
EBITDA margin to 28.8% in FY07 from 24.5% in FY06. We maintain our BUY recommendation on
Price (Rp) the counter with a target price of Rp9,000.
12 mos Hi/Lo 8,800/5,000
Good topline
Core PER- 2008F (x) Indocement’s total sales reached Rp7.3tr (+15.8%) in FY07, supported by both higher selling prices
12 mos Hi/Lo 26.6/15.1 and better sales volume. The average selling price was Rp511,000 per tonne (+4.2% yoy), while sales
volume increased to 14.3mn tonnes (+11.1%). Its exports volume reached 3.8mn tonnes in FY07,
EV/EBITDA - 2008F (x)
representing 26% of total sales, the highest proportion among the major cement players. From
12 mos Hi/Lo 12.9/7.5
a positive aspect, this gives Indocement the opportunity to boost its margins by allocating cement
Key Financial 08F/09F that would have been exported to the domestic market. Cash costs inched up by only 2.2% yoy
Net Gearing, % 11.9/net cash to Rp290,000 per tonne, leading to an improved EBITDA margin of 28.8% in FY07 (vs. 24.5% in FY06).
ROE, % 17.4/20.1
ROA, % 12.3/14.7 Lower net gearing
As Indocement performed well operationally, and was therefore able to have a healthy cash flow,
Price Relative to JCI (%)
its net gearing declined significantly to 18.1% in FY07 from 38.2% in FY06. Total loans were
1 mo -13.7
3 mos -14.3 equivalent to US$169mn consisting of a mixture of JPY, US$ and synthetic rupiah loans. With net
6 mos -9.3 gearing that low, Indocement is well placed to undertake more aggressive capex if necessary.
12 mos -19.6 Nonetheless, the management adopts a fairly conservative stance in regard to capacity expansion.
For the time being at least, Indocement has no plans for expansion other than revamping
USD/IDR - YE (Rp)
programs to increase its capacity from 17.1mn tonnes as of FY07 to around 20mn tonnes by the
2007 9,400
2008F 9,445 end of FY10.

Higher energy costs are a threat

Major shareholders (%)
HC Indocement GMBH, Germany 58.3 The largest risk factor relates to higher energy prices - especially for crude oil, whose price has been
PT Mekar Perkasa 6.0 above the US$100 level for quite some time now. Indocement uses marine fuel oil for its power
Est. free float 35.7 generator, and the price of this fuel is determined by international markets. As such, if the
government cuts the subsidies on fuel (as predicted by some), then Indocement’s production costs
INTP Index share price (LHS) relative to JCI (RHS) %
Rp would not be affected that much since its fuel is already priced at market levels. Nonetheless,
9,000 20 transportation costs - which represent 14.5% of total costs - would rise given that the fuel is
8,000 10 purchased at subsidized prices. Usually, cement producers will pass on the increased costs to the
7,000 0 customers by raising the selling prices. This may, ultimately, hit the sales volume.
6,000 -10

5,000 -20
Year end to Dec, Rp bn 2005 2006 2007 2008F 2009F
4,000 -30
Revenue, Rp bn 5,592 6,325 7,324 8,496 10,051
7/9/2007
8/6/2007
9/3/2007
3/19/2007
4/16/2007
5/14/2007
6/11/2007

10/1/2007

1/21/2008
2/18/2008
10/29/2007
11/26/2007
12/24/2007

EBITDA, Rp bn 1,672 1,548 2,109 2,579 3,132

EBITDA growth, % 27.0 (7.4) 36.2 26.3 21.5
Net profit, Rp bn 740 593 982 1,247 1,654
Core profit, Rp bn 637 524 969 1,218 1,612
Chandra S Pasaribu Core EPS fully diluted, Rp 173 142 263 331 438
(62-21) 350 9888 ext.3520 Core EPS fully diluted growth, % 3.8 -17.7 84.9 25.7 32.3
chandra@danareksa.com PER fully diluted, x 28.9 36.0 24.7 17.1 12.9
Core PER fully diluted, x 33.5 40.7 22.0 17.5 13.2
Danareksa research reports are also PBV fully diluted, x 3.8 3.5 3.2 2.8 2.4
available at First Call Direct, Reuters EV/EBITDA, x 14.8 15.2 11.1 8.6 6.7
Multex and bloomberg Yield, % 0.9 0.7 1.2 1.5 1.9

www.danareksa.com
29 February 2008 DAILY INSIGHTS

Exhibit 1. Result highlight (Rp bn)

FY07 FY06 % 4Q07 4Q06 % 3Q07 % FY07 %

Turnover 7,324 6,325 15.8 2,017 1,506 34.0 2,149 -6.1 7,007 104.5
Gross Profit 2,754 2,148 28.2 774 400 93.4 877 -11.8 2,572 107.1
Operating Profit 1,585 1,068 48.4 463 109 324.0 542 -14.5 1,426 111.2
EBITDA 2,109 1,548 36.2 611 209 192.8 662 -7.7 2,042 103.3
Net interest (180) (274) -34.1 (38) (63) -39.2 (42) -9.0 (190) 94.9
Forex (29) 49 nm (18) 17 nm (22) -18.7 (12) 239.5
Others 42 19 118.4 5 (10) -145.3 10 -56.7 10 435.6
Pretax 1,418 862 64.4 411 53 672.7 488 -15.7 1,233 115.0
Taxation (435) (269) 61.6 (128) (18) 603.2 (149) -13.6 (370) 117.7
Net Profit 982 593 65.7 283 35 709.1 339 -16.6 863 113.8
EBITDA margin , % 28.8 24.5 30.3 13.8 30.8 29.1

Indocement FY07 FY06 %

Domestic 10,552 9,766 8.0

Export 3,785 3,137 20.7
Total 14,337 12,903 11.1

Source: Company and Danareksa Sekuritas

2
29 February 2008 DAILY INSIGHTS

Share price and Recommendation

Date 15-Jan-08 11-Feb-08 14-Feb-08 29-Feb-08 18-Mar-08

Rec SELL BUY BUY BUY BUY
Target price, Rp 8,050 8,050 8,050 9,000 9,000

9,000

8,000

7,000

6,000

5,000
10/23/2007

11/28/2007
3/19/2007

4/24/2007

5/30/2007

8/10/2007

9/17/2007

3/17/2008
7/5/2007

1/3/2008

2/8/2008

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