Perkembangan Saham Sektor Semen Kuartal I 2012 by Danareksa

Cement Sector Volume 1Q12 Still Strong

Domestic cement demand was buoyant in 1Q12, up 18.2% yoy to 12.5mn tonnes. In March 2012 alone, sales volume reached 4.4mn tonnes, or up 7.8% mom. Growth was fairly evenly distributed and came from both Java and areas out of Java. Nonetheless, Java remains the largest market, accounting for 53.6% of the total demand, reflecting the infrastructure development taking place on the island, the most highly populated in Indonesia. With domestic demand so strong, cement producers have cut back on exports. Looking forward, however, additionally capacity coming on-stream may lead to higher exports provided that the domestic demand is already fulfilled.

Indocement has the capacity

Indocement enjoyed faster-than-industry growth thanks to around 3-4mn tonnes of spare capacity. Among the other cement producers, Semen Gresik fired up its Tuban plant last week, although a trial period will take place before production starts. Effectively, Semen Gresik could have some additional capacity in the second half of this year. As for Holcim, it is lagging the industry growth simply due to constrained capacity. The company performed very well last year but now faces a tough challenge to meet market demand. Going forward, Holcim will have to make sure it retains a presence in different regions as availability remains an important factor. However, this might hit the short-term profitability of the company if it decides to serve the relatively less profitable areas whilst maintaining a strong presence.

Semen Gresik's market share dips below the threshold

Semen Gresik's market share fell below 40% in 1Q12, which is the internal threshold for the company. As such, we might see more aggressive marketing efforts going forward, especially since Semen Gresik has the additional capacity. Indocement, meanwhile, outpaced the market and lifted its market share to 32.5%, while Holcim's market share edged up to 16.1%.

Slight price adjustments

Some of the cement producers indicated minor and selective price adjustments at the beginning of FY12, reflecting increases in the energy cost components. The decision to delay the hike in subsidized fuel prices has eased the cost pressures somewhat although transportation costs still stand to rise if subsidized fuel prices are hiked in the future.

Our top pick is Indocement

We favor Indocement in the sector because it has a lot of spare capacity whilst domestic cement demand remains robust. Semen Gresik, meanwhile, will become more attractive once the company gets additional capacity from its new plants. Holcim, however, will face capacity constraints until 2013 when the new plant is expected to operate.