JAKARTA. Indonesia’s cement industry is believed to face various challenges, starting from fierce competition to changes in government’s policy regarding infrastructure programs.

In the past couple of years, the government’s infrastructure projects managed to sustain the growth of bulk cement demand. With the budget cuts for infrastructure sector under Prabowo Subianto’s presidential term, the demand for bult cement is expected to drop.

However, this decline is said to be offset by bagged cement sales, which actually contribute 70% of total national cement consumption.

However, cement manufacturers like PT Indocement Tunggal Prakarsa Tbk (INTP) and PT Semen Indonesia (Persero) Tbk (SMGR) still have promising prospects, according to a report by PT Ina Sekuritas Indonesia.

Comparing these two issuers, INTP is projected to outperform SMGR in terms of top-line performance, as indicated through INTP’s sales volume that jumped 10% within the first seven months (7M) of 2024.

On the other hand, INTP’s net profit is estimated to slow down due to its outstanding debts for the acquisition of new factory in Central Java.

Still, this year, INTP’s financial performance is predicted to improve, driven by ongoing market expansion.

Its competitor, SMGR, is projected to score moderate growth, at approximately 15%.

“We are giving overweight recommendation for this sector, favouring INTP due to stronger growth potential in bagged cement sales,” added Ina Sekuritas Indonesia in the same report.

In the future, the risk profile for cement industry still has the potential to improve, particularly if coal prices decrease, which will lower cement production cost. (KR/ZH)

Check out the full report here.