Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<p><strong>We expect its core earnings to drop to the seven quarter low in 3Q21 then should rebound in 4Q21 onwards.</strong></p><div>• Expect its 3Q21 core earnings at Bt663m (-26%YoY,-14%QoQ), caused by mute sales and escalating energy costs, but should be the bottom quarter.</div><div></div><div>• Expect earnings to rebound  in 4Q21 onwards backed by resuming construction in Thailand and brighter outlook in ASEAN market after lockdown easing.</div><div></div><div>• Equity income contribution from business in Cambodia should be a growth driver in 2022-2023.</div><div>
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</div><p><strong>We maintain our BUY rating and rollover our TP by 8% to Bt207 based on  14.7xPE’22E target, which is its pre-COVID level. Our rating reflect positive outlook on cement demand recovery post-COVID in both domestic and export markets. The company will also benefit from diversifying its business into fast-growing market in Asia in long-term.</strong></p>

We expect its core earnings to drop to the seven quarter low in 3Q21 then should rebound in 4Q21 onwards.• Expect its 3Q21 core earnings at Bt663m (-26%YoY,-14%QoQ), caused by mute sales and escalating energy costs, but should be the bottom quarter.• Expect earnings to rebound  in 4Q21 onwards backed by resuming construction in Thailand and brighter outlook in ASEAN market after lockdown easing.• Equity income contribution from business in Cambodia should be a growth driver in 2022-2023.
 
We maintain our BUY rating and rollover our TP by 8% to Bt207 based on  14.7xPE’22E target, which is its pre-COVID level. Our rating reflect positive outlook on cement demand recovery post-COVID in both domestic and export markets. The company will also benefit from diversifying its business into fast-growing market in Asia in long-term.

SCCC: Expect 3Q21 Earnings to Be Bottom Quarter

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Indocement Tunggal Prakarsa / Equity Bottom-Up

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<p><span data-preserver-spaces="true">Given we are now coming out of Indonesia's latest wave of COVID-19 and mobility and economic activity is resuming , we see <a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> as an interesting proxy for the recovery, given its exposure to West Java, infrastructure spending, and the recovering residential property market </span></p>
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<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"><span data-preserver-spaces="true">Indocement Tunggal Prakarsa (INTP IJ)</span></a><span data-preserver-spaces="true"> released a solid set of 1H2021 results, with an increase in revenue of +8.0% YoY on the back of an increase in cement volume.  </span><span data-preserver-spaces="true">EBITDA margins improved from 15.5% to 19.2% due to savings in operating expenses and gains in other operating income, leading to an EBITDA increase of +33.6% YoY to IDR1,280.6bn. <a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"></a></span><span data-preserver-spaces="true"> </span></p>
<section class="figure">One major cost pressure comes from rising coal prices, which have increased significantly over the past year and the company has been continually both increasing its usage of low calorific coal and alternative fuels over the past 5-years to offset this.</section>
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<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> has a strong focus on improving its emissions, with assistance from the Heidelberg Cement Technology Centre, with a road map in place for energy efficiency and CO2 reductions.</p>
<p>The fact that around 78% of cement sales at <a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> is in bags makes branding all the more important and as a result the company is quite focused on promoting the brand through TV and social media channels.</p>
<section class="figure">The company continues with its digitalisation and has developed a fully digitalised ordering system with real time data which helps the company's sales to achieve better results both on ordering as well as on pricing.</section>
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<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> estimates that national cement domestic growth will increase by +5% for FY2021 with the resumption of more infrastructure projects and private projects in 2H2021 plus more activity in residential property.</p>
<p>The company's expansion will be focused on expanding its distribution channels through possible new terminals and barge or vessel ownership, as well as potentially exploring M&amp;A opportunities. </p>
<p><span data-preserver-spaces="true"><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> trades on 11.1x FY21E EV/EBITDA and 9.9x FY22E EV/EBITDA versus its 5-year average forward EV/EBITDA of 15x, making the company look attractive from a valuation perspective. </span></p>


Given we are now coming out of Indonesia's latest wave of COVID-19 and mobility and economic activity is resuming , we see Indocement Tunggal Prakarsa (INTP IJ) as an interesting proxy for the recovery, given its exposure to West Java, infrastructure spending, and the recovering residential property market 

Indocement Tunggal Prakarsa (INTP IJ) released a solid set of 1H2021 results, with an increase in revenue of +8.0% YoY on the back of an increase in cement volume.  EBITDA margins improved from 15.5% to 19.2% due to savings in operating expenses and gains in other operating income, leading to an EBITDA increase of +33.6% YoY to IDR1,280.6bn.  
One major cost pressure comes from rising coal prices, which have increased significantly over the past year and the company has been continually both increasing its usage of low calorific coal and alternative fuels over the past 5-years to offset this.



Indocement Tunggal Prakarsa (INTP IJ) has a strong focus on improving its emissions, with assistance from the Heidelberg Cement Technology Centre, with a road map in place for energy efficiency and CO2 reductions.
The fact that around 78% of cement sales at Indocement Tunggal Prakarsa (INTP IJ) is in bags makes branding all the more important and as a result the company is quite focused on promoting the brand through TV and social media channels.
The company continues with its digitalisation and has developed a fully digitalised ordering system with real time data which helps the company's sales to achieve better results both on ordering as well as on pricing.





Indocement Tunggal Prakarsa (INTP IJ) estimates that national cement domestic growth will increase by +5% for FY2021 with the resumption of more infrastructure projects and private projects in 2H2021 plus more activity in residential property.
The company's expansion will be focused on expanding its distribution channels through possible new terminals and barge or vessel ownership, as well as potentially exploring M&amp;A opportunities. 
Indocement Tunggal Prakarsa (INTP IJ) trades on 11.1x FY21E EV/EBITDA and 9.9x FY22E EV/EBITDA versus its 5-year average forward EV/EBITDA of 15x, making the company look attractive from a valuation perspective. 

Indocement Tunggal Prakasa (INTP IJ) - Bulky Recovery in Place

<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"><span data-preserver-spaces="true">Indocement Tunggal Prakarsa (INTP IJ)</span></a><span data-preserver-spaces="true"> released results last week with an -11%  decrease in sales to IDR 14,184.3bn but only a -1.6% decrease in net profit to IDR1,803.3bn, with a number of cost reduction initiatives baring fruit in 2020 and we see these initiative continuing into 2021 on top of higher sales.</span></p><p><span data-preserver-spaces="true">The company saw resilient performance last year from its bag cement sales but bulk cement demand suffered as infrastructure projects stalled but we expect this situation to reverse this year.</span></p><p><span data-preserver-spaces="true">The cost of revenues decreased last year due to lower volumes and continuous savings on fuel and power with lower coal prices but with greater use of LCV coal, alternative fuels, and other operational cost savings, plus the ongoing digitalization at the company. </span></p><p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> will continue to push these cost initiatives in 2021, with the potential to further increase the use of LCV coal and alternative fuels.</p><p>The company has seen a slow start to the year due to heavy rains but we should expect a strong rebound from April onwards as projects get underway.</p><p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> continues to improve its sustainability credentials with lower emissions and new environmentally friendly products. </p><p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> trades on 13.2x FY21E EV/EBITDA and 12.0x FY22E EV/EBITDA versus its 5-year average of 14.4x forward EV/EBITDA, making the company look relatively attractive from a valuation standpoint.</p>

Indocement Tunggal Prakarsa (INTP IJ) released results last week with an -11%  decrease in sales to IDR 14,184.3bn but only a -1.6% decrease in net profit to IDR1,803.3bn, with a number of cost reduction initiatives baring fruit in 2020 and we see these initiative continuing into 2021 on top of higher sales.The company saw resilient performance last year from its bag cement sales but bulk cement demand suffered as infrastructure projects stalled but we expect this situation to reverse this year.The cost of revenues decreased last year due to lower volumes and continuous savings on fuel and power with lower coal prices but with greater use of LCV coal, alternative fuels, and other operational cost savings, plus the ongoing digitalization at the company. Indocement Tunggal Prakarsa (INTP IJ) will continue to push these cost initiatives in 2021, with the potential to further increase the use of LCV coal and alternative fuels.The company has seen a slow start to the year due to heavy rains but we should expect a strong rebound from April onwards as projects get underway.Indocement Tunggal Prakarsa (INTP IJ) continues to improve its sustainability credentials with lower emissions and new environmentally friendly products. Indocement Tunggal Prakarsa (INTP IJ) trades on 13.2x FY21E EV/EBITDA and 12.0x FY22E EV/EBITDA versus its 5-year average of 14.4x forward EV/EBITDA, making the company look relatively attractive from a valuation standpoint.

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

<p>We maintain BUY rating on SCCC with a new 2021E target price at Bt192.0 (from Bt139.0), derived from 15.9xPE’21E, which is currently trading of World materials peers.</p><ul>
<li>SCCC posted net profit in 2Q20 of Bt1.0bn (+61%YoY, +24%QoQ).</li>
<li>Even though its revenue contracted and gross margin was moderate, expenses control helped to boost its earnings performance.</li>
<li>2Q20 revenue was Bt10.2bn (-15%YoY, -8% QoQ).</li>
<li>Gross profit margin was at 32.5% in 1Q20 (+4.0ppts YoY, flat QoQ).</li>
<li>SG&amp;A to sales was 18.7% in 2Q20 (-2.8ppts YoY, -3.6ppts QoQ).</li>
<li>Equity income contracted to Bt162m (-4%YoY, -19%QoQ)
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</ul><p>We revised up 2020-22E earning by 13-16%, taking into account a better cost control in 2Q20.</p>

We maintain BUY rating on SCCC with a new 2021E target price at Bt192.0 (from Bt139.0), derived from 15.9xPE’21E, which is currently trading of World materials peers.
SCCC posted net profit in 2Q20 of Bt1.0bn (+61%YoY, +24%QoQ).
Even though its revenue contracted and gross margin was moderate, expenses control helped to boost its earnings performance.
2Q20 revenue was Bt10.2bn (-15%YoY, -8% QoQ).
Gross profit margin was at 32.5% in 1Q20 (+4.0ppts YoY, flat QoQ).
SG&amp;A to sales was 18.7% in 2Q20 (-2.8ppts YoY, -3.6ppts QoQ).
Equity income contracted to Bt162m (-4%YoY, -19%QoQ)

We revised up 2020-22E earning by 13-16%, taking into account a better cost control in 2Q20.

SCCC: Cost Control Helped Offsetting Weak Cement Demand

<p><strong>We maintain BUY rating on SCCC with new 2020E target price at Bt139.0 (from Bt229.00), derived from 14.2xPE’20E, which is current trading of Asia ex. Japan materials peers. The 39%YTD fall of the stock should largely priced in the impact from COVID-19 and cement demand hiccup.</strong></p>
<div>• SCCC posted net profit in 1Q20 of Bt826m (-25%YoY, +72%QoQ).</div>
<div>• The YoY retreat came from lower cement demand and planned shutdown in Thailand and Sri Lanka. The QoQ recovery was due to low base in 4Q19.</div>
<div>• 1Q20 revenue was Bt11.0bn (-7%YoY, -7% QoQ).</div>
<div>• Gross profit margin was at 32.5% in 1Q20 (-0.2ppts YoY, +0.9ppts QoQ).</div>
<div>• SG&amp;A to sales was 22.4% in 1Q20 (+0.6ppts YoY, +1.6ppts QoQ).</div>
<div>• Equity income was solid at Bt199m (Flat YoY, +99%QoQ).</div>
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<p><strong>We Cut 2020-21E earning by 24%, taken into account impact from COVID-19 and mothballing of kiln 1 production line in Thailand.</strong></p>

We maintain BUY rating on SCCC with new 2020E target price at Bt139.0 (from Bt229.00), derived from 14.2xPE’20E, which is current trading of Asia ex. Japan materials peers. The 39%YTD fall of the stock should largely priced in the impact from COVID-19 and cement demand hiccup.
• SCCC posted net profit in 1Q20 of Bt826m (-25%YoY, +72%QoQ).
• The YoY retreat came from lower cement demand and planned shutdown in Thailand and Sri Lanka. The QoQ recovery was due to low base in 4Q19.
• 1Q20 revenue was Bt11.0bn (-7%YoY, -7% QoQ).
• Gross profit margin was at 32.5% in 1Q20 (-0.2ppts YoY, +0.9ppts QoQ).
• SG&amp;A to sales was 22.4% in 1Q20 (+0.6ppts YoY, +1.6ppts QoQ).
• Equity income was solid at Bt199m (Flat YoY, +99%QoQ).

We Cut 2020-21E earning by 24%, taken into account impact from COVID-19 and mothballing of kiln 1 production line in Thailand.

SCCC: Negative Outlook Should Already Priced In

Thailand

Siam City Cement is a leading Thai manufacturer and distributor of cement and construction materials, including ready-mixed concrete, aggregates, and light building materials such as fiber cement and lightweight concrete blocks. The company also engages in waste management, industrial services, and energy production. It was established on May 16, 1969, and is headquartered in Bangkok, Thailand.

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Siam City Cement (SCCC TB)

SCCC: Expect 3Q21 Earnings to Be Bottom Quarter

We expect its core earnings to drop to the seven quarter low in 3Q21 then should rebound in 4Q21 onwards. We maintain our BUY rating and rollover...

Pi Securities PCL, Thailand

Indocement Tunggal Prakasa (INTP IJ) - Bulky Recovery in Place

We see Indocement as an interesting and high-quality proxy to the recovery in the Indonesian economy, given its exposure to infrastructure through...

Angus Mackintosh

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

Indocement is a high-quality core holding for exposure to the recovery in cement demand this year and next, with lower costs and digitalization...

Angus Mackintosh

SCCC: Cost Control Helped Offsetting Weak Cement Demand

We maintain BUY rating on SCCC with a new 2021E target price at Bt192.0 (from Bt139.0), derived from 15.9xPE’21E, which is currently trading of...

Pi Securities PCL, Thailand

SCCC: Negative Outlook Should Already Priced In

We maintain BUY rating on SCCC with new 2020E target price at Bt139.0 (from Bt229.00), derived from 14.2xPE’20E, which is current trading of Asia...

Pi Securities PCL, Thailand

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