On Thursday, Citi reaffirmed its Buy rating on Indocement Tunggal Prakarsa Tbk PT (INTP:IJ) (OTC: PITPF) stock, maintaining a price target of IDR10,000.00. The company experienced a significant increase in May sales volume, which surged by 21%. This growth was seen in both bulk and bagged products.
The rise in sales is partly attributed to a price increase implemented in the latter half of May, which may lead to normalized sales volume in June. However, Citi anticipates a return to sustainable improvements in the second half of the year, consistent with the company's historical performance.
Citi's analysis suggests that the impressive sales growth should not raise concerns regarding profitability. The firm expects that the second quarter margins of 2024 will remain stable compared to the previous quarter.
This outlook is based on several factors: the bulk cement ratio aligns with forecasts, the company is unlikely to expand its economic brand since competitors also raised prices in May, and ongoing efforts to enhance cost efficiencies. Additionally, the distribution of holiday bonuses in the first quarter is expected to contribute positively to the company's financial health.
The financial institution's position is further supported by Indocement Tunggal Prakarsa's current trading valuations, which are set at 15.6 times the projected earnings for the fiscal year 2024 and 13.7 times for 2025.
The enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratios are also favorable, standing at 7.2 for 2024 and 6.2 for 2025, with the enterprise value per ton calculated at $50 for 2024 and $48 for 2025.
Citi's endorsement of Indocement Tunggal Prakarsa reflects confidence in the company's ability to maintain its growth trajectory and manage profitability effectively. Despite the potential for sales normalization in the near term, the broader outlook for the latter half of the year remains positive, in line with the company's established track record.
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