Indonesia Cement Sector

Transcription

1 Asia Pacific/Indonesia Equity Research Cement (Building Materials & Construction ID (Asia)) Research Analysts Ella Nusantoro Christy Halim Indonesia Cement Sector SECTOR REVIEW Geared up Figure 1: Demand to meet supply E 2018E 2020E Domestic cement cap (mn tonnes) Domestic cement demand (mn tonnes) Source: Indonesia Cement Association, company data, Credit Suisse estimates Plenty of overcapacity concerns, but not all capacity created equal. Capacity in Java is much more important than that in ex-java. The ex-java region is estimated to account for only 35% of the total capacity by 2016E an area that accounts for 40% of total demand currently. Producers such as Semen Indonesia which have presence both in Java and ex-java markets are likely to be better off. We adjust our domestic demand growth this year to 5% (1x GDP growth) and 8% next year (1.5x GDP growth). We believe that in these two years, demand will be driven more by property than infrastructure. From 2017 onwards, we are looking for demand to grow by 11% (2x GDP growth) as the much-needed infrastructure projects will kick in. Multi-year growth story. We believe that the government intervention in setting cement prices is a one-off event and will likely to be reversed in 2H15. We think the stock price reaction to this policy creates an opportunity to accumulate. We maintain our OVERWEIGHT rating on the sector. In our view, the sector is a multi-year growth story, with earnings growth likely driven by higher volumes and modest ASP increases. Stock picks. We like Semen Indonesia, for its diverse plant location, and Holcim Indonesia, given its new plant allows it to serve a new market. We maintain our NEUTRAL rating on Indocement due to valuation. We upgrade Holcim Indonesia to OUTPERFORM from Neutral. We set our new target price for Semen Indonesia at Rp18,800 (12x EV/EBITDA 2015E), for Indocement at Rp25,600 (11x EV/EBITDA 2015E), and for Holcim Indonesia at Rp2,300 (9x EV/EBITDA 201E), which we derive based on their 2011/12 valuations, when Indonesia cement demand rose to 2x GDP growth at similar levels, we should see significant boost from infrastructure projects. DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION Client-Driven Solutions, Insights, and Access

2 Focus charts and table Figure 2: Weighted average cement demand vs YoY growth E 2017E 2019E Domestic cement demand (mn tonnes) YoY growth (%) 20% 18% 16% 14% 1 10% Source: Indonesia Cement Association, Company data, Credit Suisse estimates Figure 4: Market share based on installed capacity, 2015E Semen Garuda 3% Semen Merah Putih 9% Semen Kupang 1% Semen Bosowa Maros 6% Semen Jawa 4% Semen Tonasa 11% Semen Andalas Semen Gresik 15% Semen Padang 8% Holcim Indonesia 16% Indocement 21% Conch South Kalimantan Cement 3% 8% 6% 4% 0% Semen Baturaja Figure 3: Weighted average utilisation rate 100% 95% 93% 94% 93% 90% 89%89% 89% 88% 85% 85% 85% 83% 83% 81% 81% 80% 75% 75% 7 70% 65% 60% E 2017E 2019E Source: Indonesia Cement Association, company data, Credit Suisse estimates Figure 5: Cement capacity breakdown, by region 80% 71% 71% 71% 70% 65% 66% 67% 65% 65% 60% 50% 40% 30% 19% 18% 15% 15% 14% 17% 18% 18% 20% 16% 16% 16% 16% 14% 14% 15% 14% 10% 0% E 2015E 2016E 2017E Java Sumatra Kalimantan Sulawesi Figure 6: Indonesia cement sector valuations Price Mkt cap EPS P/E (x) EV/EBITDA (x) EV/t (US$) DY EBITDA margin ROE Net gearing Ticker (Rp) (Rp bn) CAGR E 16E 15E 16E 15E 16E 15E 15E 16E 15E 15E 16E SMGR.JK 14,875 88, % % 32.9% 35.0% 21.3% 3.7% 11.1% INTP.JK 24,050 88, % % 34.8% 35.8% 20.5% -40.3% -45.9% SMCB.JK 1,910 14, % % 22.1% 21.9% 9.1% 46.8% 40.5% Weighted average 18.0% % 33.0% 34.4% 20.0% -13.3% -13.0% *Share price as of 27 Feb Indonesia Cement Sector 2

3 Geared up Infra projects to drive demand growth With the new capacity installed and Jokowi government's aggressive infrastructure push, we believe there is room for demand growth. Given 63% higher budget approved for infrastructure this year to Rp290 tn, this would result in higher cement demand. As such, we believe that despite the obstacles that the government of Indonesia (GoI) might face while executing the projects, our expectation for 5% higher cement growth YoY this year is on the conservative side. This equates to 1x GDP growth (CS estimates 5% GDP growth this year). We believe that GoI will have most of the land clearances; thus construction activities will start the following year. Thus, demand this year is likely to come from the retail sector. We estimate much higher volume growth going forward: 8% growth next year, and11% thereafter, or at 1.5x and 2x GDP growth, respectively (CS estimates 5.5% GDP growth in 2016E), respectively. Cement prices are market determined Cement prices in Indonesia are not controlled by the government. It is market-based price. The government normally does not intervene in the market mechanism. Only on 19 January 2015 the President of Indonesia announced that cement price sold by the SOEs would reduce by Rp3,000/sack, or around 5% at the retail level. The combined domestic market share of Semen Indonesia and Semen Baturaja was 4 in FY14, based on data from the Indonesia Cement Association. Hence, they were affected the most, and their competitors followed suit. We spoke with several industry experts who said it is unlikely that the GoI would intervene in setting cement prices again, although this is a risk in our view. As such, we are adjusting our cement price estimates, assuming a blend of higher prices YoY to Rp967K/t, or equivalent to US$78/t. With prices below US$80/t, it actually benefits cement producers and we believe that imported cement is unlikely to flood the market. Going forward, we are expecting a modest price increase of 4%. The sector is a multi-year growth story As we are expecting the industry to grow at 2x GDP growth, we look back to 2011/12 when demand soared on the back of strong commodity prices, thus creating new wealth and geared-up construction activities. We looked at Indonesia's future cement demand that is going to grow on a similar ratio on the back of strong demand driven by the GoI infrastructure projects and the property sector. We look back at the valuation of each of the company and reflect them into our new target prices. As such, we arrive at our new target price for Semen Indonesia at Rp18,800 (12x EV/EBITDA 2015E), Indocement at Rp25,600 (11x EV/EBITDA 2015E), and Holcim Indonesia at Rp2,300 (9x EV/EBITDA 201E). We upgrade Holcim Indonesia to OUTPERFORM from Neutral, and maintain our OUTPERFORM on Semen Indonesia and NEUTRAL on Indocement. Indonesia Cement Sector 3

4 Infra projects to drive demand growth Figure 7: Indonesia cement supply and demand mtpa E 2016E 2017E 2018E 2019E 2020E CAGR CAGR E-17E Design capacity-eop % 14.1% YoY growth 2.1% 6.5% 2.4% 11.4% 14.3% 7.5% 10.3% % 0.0% 0.0% 2.0% Addition (reduction) Domestic sales % 9.6% Imports Domestic demand % YoY growth 2.6% 4.4% 17.7% 14.5% 7.3% 3.0% 5.0% 8.3% 11.0% 11.0% 11.0% 11.0% Export demand YoY growth -18.7% -27.7% -59.1% -84.0% 202.8% -53.9% Domestic+Import+Export % YoY growth 0.1% 1.4% 12.6% 12.1% 7.9% 2.5% 4.5% 8.3% 11.0% 11.0% 11.0% 11.0% Excess capacity (0.9) % % to total capacity 1 17% 7% 6% 11% 15% 19% 28% 25% 17% 7% -1% -2.7% 15.6% Utilisation rate 87.5% 83.0% 92.8% 94.3% 88.7% 84.7% 81.4% 71.5% % 92.6% 100.8% Excess capacity, excl (0.9) % export-eop % to total capacity 21% 23% 9% 6% 1 16% 19% 28% 25% 17% 7% -1% -8.0% 15.6% GDP growth 4.6% % 6.3% 5.8% 5.0% 5.0% 5.5% 5.5% 5.5% 5.5% 5.5% Dom demand/gdp growth (x) Consumption/capita (kg) % 6.4% YoY growth 1.3% 3.1% 14.6% 12.4% 5.8% 1.6% 1.9% 5.0% 7.7% 7.7% 7.7% 7.7% Population (mn) % 3.1% YoY growth 1.3% 1.3% 2.7% 1.9% 1.4% 1.4% 3.1% 3.1% 3.1% 3.1% 3.1% 3.1% GDP/capita (US$) 2,357 3,066 3,557 3,624 3,538 3,315 3,557 3,883 4,097 4,322 4,560 4, % Source: Indonesia Cement Association (ASI), CEIC, Company data, Credit Suisse estimates (1) Large-scale supply has just started to come on stream The Indonesia cement sector witnessed the largest capacity addition in 1998 when 11.5mtpa was added, or 34% YoY, bringing the country's total capacity to 45mtpa. That was at a time when the Asian Financial Crisis hit the region, and no producer was adding capacity as utlisation rate plummeted to 47%. Pre-1998, domestic demand saw a 10% CAGR during , while capacity only grew by less than 7% during the same period. In 2012, a recovery in Indonesia's economic growth brought about a recovery in the cement industry as well, with utilisation rate reaching a peak of 94% on 57.8 mtpa capacity, which means domestic demand registered a 9% CAGR over , while capacity only grew less than during the same period. Note that we are also assuming that inefficient plants might still be operating. Realising that Indonesia is going to be running out of cement, more investments are coming into the industry, mostly from the existing players that are enhancing efficiencies on their current capacity and debottlenecking. Semen Indonesia was the first to add capacity in 2012 by building brownfield plants. At the end of 2014, we have seen an We are yet to see capacity addition after the 1998 Asian Financial Crisis In 2012, with a pick-up in domestic demand, utilisation rate peaked at 94% An expected of 30mtpa capacity to come on stream by end 2016 Indonesia Cement Sector 4

5 S Andalas S Padang S Baturaja Indocement Holcim Indo S Gresik S Tonasa S Bosowa S Kupang S Merah Putih S Puger S Garuda S Jawa Conch SK S Andalas S Padang S Baturaja Indocement Holcim Indo S Gresik S Tonasa S Bosowa S Kupang S Merah Putih S Puger 02 March 2015 addition of 20 mn tonnes of cement capacity in Indonesia, or a 38% increase from 2011 of 51.9 mtpa. We are forecasting an addition of 30 mtpa capacity until the end of 2016E, for the industry to reach a total of 102 mtpa. Our forecast is based on the current ongoing construction. There shall be a potential of addition of 10 mtpa capacity, which should be largely from the Anhui Conch expansion in east of Indonesia we exclude this from our estimates until there are more clarity on the project. Figure 8: Indonesia cement capacity, 2014E Figure 9: Market share based on installed capacity, 2014E Semen Kupang Semen Bosowa 1% Maros 7% Semen Tonasa 11% Semen Merah Putih Semen Padang 10% Semen Andalas Semen Baturaja 3% Semen Gresik 18% Holcim Indonesia 17% Indocement 29% Source: Indonesia Cement Association (ASI), company data, Credit Suisse estimates Source: Indonesia Cement Association (ASI), company data, Credit Suisse estimates Figure 10: Indonesia cement capacity, 2015E Figure 11: Market share based on installed capacity, 2015E Semen Garuda 3% Semen Merah Putih 9% Semen Kupang 1% Semen Bosowa Maros 6% Semen Jawa 4% Semen Tonasa 11% Semen Andalas Semen Gresik 15% Semen Padang 8% Holcim Indonesia 16% Indocement 21% Conch South Kalimantan Cement 3% Semen Baturaja Source: Indonesia Cement Association (ASI), company data, Credit Suisse estimates Source: Indonesia Cement Association (ASI), company data, Credit Suisse estimates Indonesia Cement Sector 5

6 S Andalas S Padang S Baturaja Indocement Holcim Indo S Gresik S Tonasa S Bosowa S Kupang S Merah Putih S Puger S Garuda S Pan Asia S Jawa Conch SK S Barru S Andalas S Padang S Baturaja Indocement Holcim Indo S Gresik S Tonasa S Bosowa S Kupang S Merah Putih S Puger S Garuda S Pan Asia S Jawa Conch SK S Barru 02 March 2015 Figure 12: Indonesia cement capacity, 2016E Figure 13: Market share based on installed capacity, 2016E Semen Garuda Semen Jawa 1% Semen Pan Asia 3% Semen Merah Putih 4% Semen Bosowa Maros 5% Semen Tonasa 8% Semen Gresik 17% Semen Barru 6% Andalas 1% Semen Padang 11% Holcim Indonesia 11% Semen Conch South Kalimantan Cement 1% Indocement 25% Semen Baturaja 5% Source: Indonesia Cement Association (ASI), Company data, Credit Suisse estimates Source: Indonesia Cement Association (ASI), Company data, Credit Suisse estimates Figure 14: Indonesia cement capacity, 2017E Figure 15: Market share based on installed capacity, 2017E Semen Semen Pan Garuda Asia 1% Semen Merah Semen Putih Kupang 5% 1% Semen Bosowa Maros 5% Semen Tonasa 9% Semen Jawa Semen Gresik 17% Semen Barru 3% Semen Andalas Semen Padang 10% Semen Baturaja 4% Holcim Indonesia 13% Indocement 24% Conch South Kalimantan Cement 1% Source: Indonesia Cement Association (ASI), Company data, Credit Suisse estimates Source: Indonesia Cement Association (ASI), Company data, Credit Suisse estimates (2) Government of Indonesia (GoI) is aggressive on the infrastructure front Given the new installed capacity, is there room for demand growth to outpace supply? Yes, considering Jokowi government's aggressive infrastructure push with a 63% higher budget (to Rp290 tn) approved for infrastructure this year, this would result in higher cement demand. The highest budgetary allocation (36% of the total budget) has been given to the Ministry of Public Works and Housing (please refer to "Indonesia Construction Sector: Signed, sealed, delivered", dated 25 Feb 2015, by Rachel Tan). Historically, the GoI has spent around 90% of its budget. GoI's aggressive infrastructure push Indonesia Cement Sector 6

7 Figure 16: Estimated infrastructure expenditure in the approved 2015 revised budget Rp tn Approved revised Proposed revised Old YoY 2015 budget 2015 budget budget budget Chg Kementerian pekerjaan umum dan Ministry of Public Works & Housing % perumahan Kementerian perhubungan Ministry of Transport Kementerian energi & sumber daya Ministry of Enery & Minerals % mineral Dana Alokasi Khusus (DAK) Special Fund Allocation % Investasi Pemerintah untuk infrastruktur Government's investment in infra % Others % Total budgeted infra exp (ex equity injection) % Penyertaan Modal Negara Equity Injection % Total budgeted infra exp % Infra % of GDP 2.6% 2.5% 1.7% 1.7% Source: 2015 APBNP As such, we believe that despite the obstacles that the GoI might face while executing the projects, our expectation of 5% higher cement growth YoY this year is on the conservative side. This equates to 1x GDP growth (CS estimates 5% GDP growth this year). We believe that the GoI will do most of the land clearances; thus construction activities will start the following year. Thus, demand this year is likely to come from the retail sector. We estimate much higher volume growth going forward: 8% growth next year and11% thereafter, at 1.5x and 2x GDP growth, respectively (CS estimates 5.5% GDP growth in 2016E). Note that the GoI has a plan to achieve the following infrastructure development by 2019: Roads: 2,600 km of new roads and 1,000 km of new toll roads Air transport: 15 airports Sea infrastructure: 24 seaports, procure 50 ferries for remote areas Railway: 3,258 km Electricity: additional 35k MW capacity Water: 49 dams We are conservative on our demand estimates (3) Property sector is growing According to our 2015 Indonesia Consumer Survey, about 81% of the respondents already owned a property, either themselves or their family members. The urge to wanting to buy property continues to be high, with 31% of the respondents planning to buy houses in the next two years. Despite the growth slowdown in property pre-sales last year, the property sector is still growing. With the recent decline in interest rate (and we expect a further cut this year), we expect stronger property sales growth, which should result in higher cement sales. Indonesia Cement Sector 7

8 Figure 17: Property ownership and potential purchase in Indonesia Age Monthly income % of respondents Total Urban Rural Java Non-Java <Rp1.5mn Rp mn >Rp7.5mn 2014 Property ownership Planning to buy in next 2 years? Property ownership Planning to buy in next 2 years? Property ownership Planning to buy in next 2 years? Property ownership Planning to buy in next 2 years? Property ownership Planning to buy in next 2 years? Source: Credit Suisse Indonesia Consumer Survey 2015 Figure 18: Slowdown in property pre-sales growth last year % Figure 19: BI rate (%) % % 60% 13% % % % % 40% 30% 20% 10% 0% -10% 11% 9% 7% Property presales (Rp bn) YoY growth (%) 5% Feb-06 Mar-07 Apr-08 May-09 Jun-10 Jul-11 Aug-12 Sep-13 Oct-14 * Data based on five listed property companies ( SMRA, ASRI, CTRA, BSDE). Source: Company data Source: CEIC (4) Weighted average capacity is running at 81% utilisation rate this year With supply outpacing demand growth, utilisation rate is estimated to decline to 76% this year, and 68% next year, before picking up again to 75% in 2017E. This is equivalent to excess capacities of 21 mtpa, 33 mtpa, and 25 mtpa on each year of 2015, 2016 and However, our assumption is based on year-end capacity, and if are we using the estimated month of completion during the period, we actually will not see as much production available, and one should note as well that commissioning of a plant does not immediately allow it to run at full capacity, but in a gradual manner. So realistically, we calculate that utlisation rate for 2015, 2016 and 2017 will be at 81%, 7, and 75%, with excess capacity estimated at 15 mtpa, 28 mtpa, and 25 mtpa, respectively. Indonesia Cement Sector 8

9 Figure 20: Estimated Indonesia cement supply and demand mn tonnes E 2016E 2017E Weighted average Capacity Domestic demand Excess capacity % to total capacity 15.3% 18.6% 28.5% 24.8% Utilisation rate 84.7% 81.4% 71.5% 75. End of period Capacity Domestic demand Excess capacity % to total capacity % 32.3% 24.8% Utilisation rate 84.8% 75.6% 67.7% 75. Source: Indonesia Cement Association (ASI), Company data, Credit Suisse estimates (5) Indonesia is an archipelago Cement demand comes from every part of Indonesia. While we are looking at the total industry supply and demand, we are generalising the sector, but not all capacity is created equal. Capacity in Java is much more important than in the ex-java region. Capacity in ex- Java is estimated to account for only 35% of the total by 2016E, while its demand accounts for around 40% of total currently. Therefore, building a plant in the east of Indonesia or in Java or in Sumatra is different for demand. And producers such as Semen Indonesia which have presence both in Java and ex-java are likely to be better off. Figure 21: Cement capacity breakdown, by region 80% 70% 60% 50% 71% 71% 71% 65% 66% 67% 65% 65% Figure 22: YoY growth of cement capacity, by region 55% 45% 35% 40% 30% 20% 10% 19% 18% 15% 15% 14% 16% 16% 14% 14% 15% 17% 18% 18% 16% 16% 14% 25% 15% 5% 0% E 2015E 2016E 2017E -5% E 2015E 2016E 2017E Java Sumatra Kalimantan Sulawesi Java Sumatra Kalimantan Sulawesi Indonesia Cement Sector 9

10 Figure 23: Cement consumption in Indonesia, 2014 Figure 24: Consumption YoY growth by region, 2014 Nusa Tenggara 6% Sulawesi 7% Kalimantan 8% East of Indonesia 7% 6% 5% 6% 6% Sumatra 21% Java 56% 4% 3% 3% 3% 4% 1% Java Sumatra Kalimantan Sulawesi Nusa Tenggara East of Indonesia Source: Indonesia Cement Association (ASI) Source: Indonesia Cement Association (ASI) Figure 25: Indonesia cement producers Source: Indonesia Cement Association (ASI) (6) Demand came mostly in bagged cement With majority of demand still being in bagged cement, a strong distribution network is needed. That said, the existing players are better off than the newcomers, as majority of the bagged cement is sold in mom and pop stores. This might change, when GoI's infrastructure projects kick in, but we do note that the bagged cement market will continue to grow as well. Bagged cement now accounts for 78% of the total cement sold in Indonesia, down from 84% of the total. In volume terms, it is 47 mn tonnes, and even though it is lesser growth as compared to the bulked cement, nevertheless, it is still an important market that needs to be served. Indonesia Cement Sector 10

11 Figure 26: Bagged cement proportion (%) Figure 27: Bulk cement proportion (%) 85% 8 84% 81% 84% 83% 84% 84% 84% 81% 81% 23% 21% 21% 2 79% 79% 78% 19% 19% 19% 19% 76% 17% 73% 17% 16% 16% 16% 16% 16% 70% % Source: Indonesia Cement Association (ASI) Source: Indonesia Cement Association (ASI) Figure 28: Bag (in volume) Figure 29: Bulk (in volume) CAGR 04-14: 6.7% % 14% 1 10% 8% 6% 4% 0% CAGR 04-14: 10.5% % 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% % Bag (mn tonnes) YoY growth (%) Bulk (mn tonnes) YoY growth (%) Indonesia Cement Sector 11

12 Cement prices are market determined Cement prices in Indonesia are not controlled by the government. It is market-based price. The government normally does not intervene with the market mechanism. Within the cement producers, the GoI owns a 51% stake in Semen Indonesia and a 76% stake in Semen Baturaja. The combined domestic market share of Semen Indonesia and Semen Baturaja is 4 in FY14, based on the data from Indonesia Cement Association. On 19 January 2015 the President of Indonesia announced that the price cement sold by the SOEs should be reduced by Rp3,000/sack, or around 5% of the retail prices. Following the announcement, the competitors reduced their price. We spoke with several sources and understand that it seems unlikely that the GoI will intervene with the cement prices again, even though this can be a risk, in our view. As such, we are adjusting our cement price estimates. We believe that prices will pick up in 2H15, with stronger demand coming through. Thus, we are assuming a YoY hike in prices to Rp967K/t, or equivalent to US$78/t. With cement prices below US$80/t, it is actually benefitting cement producers because imported cement is unlikely to flood the market. Going forward, we are expecting a modest price increase of 4%. A major element of cement cost is energy cost, which is mostly related to coal. For example, they account for around 40% of total cost. Coal prices have been declining, and while the rupiah is also weakening, net net, the overall cost has not come down much. Figure 30: Indonesia cement prices mtpa E 2016E 2017E 2018E 2019E 2020E CAGR CAGR E-17E Average inflation 4.8% 5.1% 5.3% 4.0% 6.4% % 5.4% 5.4% 5.4% 5.4% 5.4% Domestic ASP* (Th Rp/t) ,008 1,048 1,091 1,135 1, % 4.0% YoY growth 16.0% % 6.4% 3.8% 4.5% 2.5% 4.0% 4.0% 4.0% 4.0% 4.1% Domestic ASP (US$/t) % 3.4% YoY growth 8.0% 14.3% % 3.4% -19.6% 0.6% 4.0% 2.8% 3.0% 3.0% 3.0% ASP/inflation 3.3 (0.0) Ave exchg rate (Rp/US$) 10,408 9,087 8,776 9,384 9,419 12,245 12,450 12,450 12,600 12,726 12,853 12, % YoY growth -6.9% 14.5% 3.5% -6.5% -0.4% -23.1% -1.6% 0.0% % -1.0% -1.0% * ASP is based on total domestic revenue divided by total volume of Semen Indonesia, Indocement, and Holcim Indonesia, which represents around 90% market share Indonesia Cement Sector 12

13 Rp/USD USD/barrel 02 March 2015 Figure 31: Coal (USD/metric tonne) Avg 2012: Avg 2013: Avg 2014: YTD 2015: Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Coal (USD/metric ton) Figure 32: Brent crude oil (USD/barrel) Avg 2012: Rp Avg 2014: 97.5 Avg 2013: YTD 2015: Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Brent crude oil (USD/barrel) Source: the BLOOMBERG PROFESSIONAL service Figure 33: USDIDR Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan Avg 2012: Rp9, Avg 2013: Rp10, Avg 2014: Rp11,870 Source: the BLOOMBERG PROFESSIONAL service Figure 34: Semen Indonesia Cost breakdown, 2015E Depletion, depreciation & amortization 8% G&A 3% Maintenance 10% Others 3% Transportation 16% Direct labor 11% Electricity 16% RM & supporting materials 6% Fuel 21% Packaging 6% YTD 2015: Rp12,672 Source: the BLOOMBERG PROFESSIONAL service Figure 35: Indocement Cost breakdown, 2015E Packaging costs 8% Others 19% Fuel & power 39% Raw materials 24% Direct labor 10% Figure 36: Holcim Indonesia Cost breakdown, 2015E Packaging 4% Raw materials 1 Others 1 Electricity 28% Salaries & wages 10% Coal 2 Depreciation 1 Indonesia Cement Sector 13

14 The sector is a multi-year growth story As we are expecting the industry to grow at 2x GDP growth, we look back at the 2011/12 period, where demand soared driven by strong commodity prices, creating new wealth that geared up construction activities. We look at Indonesia's future cement demand which is likely to grow on a similar ratio driven by the strong demand drive from the GoI infrastructure projects and property sector. We look back at the valuations of each of the companies and include that into our new target price. As such, we arrive at our new target price for Semen Indonesia at Rp18,800 (12x EV/EBITDA 2015E), Indocement at Rp25,600 (11x EV/EBITDA 2015E), and Holcim Indonesia at Rp2,300 (9x EV/EBITDA 201E). We like Semen Indonesia for its diverse plant locations as it will benefit from the wide spread of infrastructure projects and maintain our OUTPERFORM rating on the stock. We upgrade our rating on Holcim Indonesia to OUTPERFORM as valuations look undemanding now and it will have the highest growth among the other two competitors. We maintain our NEUTRAL rating on Indocement due to demanding valuation. We adjust our earnings estimates with assumptions on lower GDP growth as well as lower ASP this year, which in turn lowered the margins for this year. As a result of the earnings downgrade, the growth is minimal for this year, but will likely be back to stronger growth next year onwards with a more stronger view on demand. Figure 37: Indonesia Cement target price valuation Price Old New % P/E (x) EV/EBITDA (x) EV/t Ticker Company (Rp) TP (Rp) TP (Rp) Chg upside 15E 16E 17E 15E 16E 17E 15E 16E 17E SMGR.JK Semen Indonesia 14,875 19,100 18, % 26.4% INTP.JK Indocement 24,050 25,700 25, % 6.4% SMCB.JK Holcim Indonesia 1,910 2,825 2, % 20.4% *Share price as of 27 Feb Figure 38: Indonesia Cement current valuation Price Mkt cap EPS P/E (x) EV/EBITDA (x) EV/t (US$) DY EBITDA margin ROE Net gearing Ticker (Rp) (Rpbn) CAGR E 16E 15E 16E 15E 16E 15E 15E 16E 15E 15E 16E SMGR.JK 14,875 88, % % 32.9% 35.0% 21.3% 3.7% 11.1% INTP.JK 24,050 88, % % 34.8% 35.8% 20.5% -40.3% -45.9% SMCB.JK 1,910 14, % % 22.1% 21.9% 9.1% 46.8% 40.5% *Share price as of 27 Feb 18.0% % 33.0% 34.4% 20.0% -13.3% -13.0% Indonesia Cement Sector 14

15 Rp/share Rp/share 02 March 2015 Figure 39: Summary of financial performance of Indonesia cement producers (Rp bn) SMGR INTP SMCB SMGR INTP SMCB SMGR INTP SMCB SMGR INTP SMCB Sales vol (mn t) ASP (US$/t) Revenue 26,248 20,163 10,341 28,391 21,751 11,193 31,744 24,490 12,594 36,308 28,194 14,219 Gross profit 11,503 9,067 3,183 12,229 9,624 3,386 13,789 11,029 3,871 15,955 12,794 4,515 Op profit 7,148 6,062 1,575 7,566 6,403 1,676 8,754 7,514 1,955 10,245 8,730 2,400 Pre-tax profit 6,947 6,921 1,150 7,356 7,154 1,112 8,364 8,410 1,393 10,056 9,839 1,910 Net profit 5,391 5, ,707 5, ,487 6,479 1,002 7,796 7,579 1,375 Margins: Gross 43.8% 45.0% 30.8% 43.1% 43.9% 30.3% 43.4% 44.7% 30.7% 43.9% 45.1% 31.8% Operating % % 29.1% 15.0% 27.6% 30.3% 15.5% % 16.9% Pre-tax 26.5% 34.0% 11.1% 25.9% % 26.3% 33.7% 11.1% 27.7% 34.7% 13.4% Net 20.5% 25.9% 8.0% 20.1% 24.5% 7.1% 20.4% 25.6% 8.0% 21.5% 26.4% 9.7% YoY growth: Sales vol 2.4% 2.6% 3.8% 5.3% 5.0% 5.3% 8.1% % 10.7% 11.0% 8.8% ASP % -10.3% 1.0% 0.7% % 2.9% 4.0% 3.3% Revenue 7.1% 7.9% 6.8% % % 12.6% 12.5% 14.4% 15.1% 12.9% Gross profit 5.1% 4.8% -5.1% 6.3% 6.1% 6.4% 12.8% 14.6% 14.3% 15.7% 16.0% 16.6% Op profit % % 5.6% 6.5% 15.7% 17.4% 16.6% 17.0% % Pre-tax profit 0.4% 4.9% 2.1% 5.9% 3.4% -3.4% 13.7% 17.6% 25.3% % 37. Net profit 0.4% 6.3% 1.9% 5.9% 3.4% -3.4% 13.7% 17.6% 25.3% % 37. Figure 40: Semen Indonesia forward P/E band Avg : 22.1x Feb-10Aug-10Feb-11Aug-11Feb-12Aug-12Feb-13Aug-13Feb-14Aug-14Feb-15 Price 12 X 14 X 16 X 18 X Figure 41: Semen Indonesia forward EV/EBITDA Avg : 12.1x Feb-10Aug-10 Feb-11Aug-11 Feb-12 Aug-12 Feb-13Aug-13 Feb-14Aug-14 Feb-15 Price 9 X 10 X 11 X 12 X Indonesia Cement Sector 15

16 Rp/share Rp/share Rp / share Rp/share 02 March 2015 Figure 42: Indocement forward P/E band Figure 43: Indocement forward EV/EBITDA Avg : 23.6x Avg : 11.5x Feb-10Aug-10Feb-11Aug-11Feb-12Aug-12Feb-13Aug-13Feb-14Aug-14Feb-15 Price 14 X 15 X 16 X 17 X Figure 44: Holcim Indonesia forward P/E band 4300 Avg : 13.8x Feb-10Aug-10Feb-11Aug-11Feb-12Aug-12Feb-13Aug-13Feb-14Aug-14Feb-15 Price 16 X 18 X 20 X 22 X Feb-10Aug-10Feb-11Aug-11Feb-12Aug-12Feb-13Aug-13Feb-14Aug-14Feb-15 Price 8 X 9 X 10 X 11 X Figure 45: Holcim Indonesia forward EV/EBITDA 4000 Avg : 9x Feb-10Aug-10 Feb-11Aug-11 Feb-12 Aug-12 Feb-13Aug-13 Feb-14Aug-14 Feb-15 Price 8 X 9 X 10 X 11 X Figure 46: Semen Indonesia change of estimates Old New Changes YoY growth Rpbn 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E Net sales 27,334 30,495 34,200 26,248 28,391 31, % -6.9% % % Gross profit 12,288 13,860 15,667 11,503 12,229 13, % -11.8% -12.0% 5.1% 6.3% 12.8% Operating profit 7,768 8,850 10,078 7,148 7,566 8, % -14.5% -13.1% % 15.7% Pre-tax profit 7,580 8,691 9,900 6,947 7,356 8, % -15.4% -15.5% 0.4% 5.9% 13.7% Net profit 5,881 6,740 7,676 5,391 5,707 6, % -15.3% -15.5% 0.4% 5.9% 13.7% Margin analysis: Gross 45.0% 45.5% 45.8% 43.8% 43.1% 43.4% Operating 28.4% 29.0% 29.5% % 27.6% Pre-tax 27.7% 28.5% 28.9% 26.5% 25.9% 26.3% Net 21.5% 22.1% 22.4% 20.5% 20.1% 20.4% Indonesia Cement Sector 16

17 Figure 47: Indocement change of estimates Old New Changes YoY growth Rpbn 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E Net revenues 20,481 23,079 26,252 20,163 21,751 24, % -5.8% -6.7% 7.9% 7.9% 12.6% Gross profit 9,272 10,558 11,993 9,067 9,624 11, % -8.0% 4.8% 6.1% 14.6% Operating profit 6,238 7,155 8,159 6,062 6,403 7, % -10.5% -7.9% 0.0% 5.6% 17.4% Pre-tax profit 7,045 7,930 9,096 6,921 7,154 8, % -9.8% -7.5% 4.9% 3.4% 17.6% Net profit 5,356 6,029 6,916 5,331 5,511 6, % -8.6% -6.3% 6.3% 3.4% 17.6% Margin analysis: Gross margin 45.3% 45.7% 45.7% 45.0% % -0.7% -3.3% -1.4% Operating margin 30.5% 31.0% 31.1% 30.1% 29.4% 30.7% -1.3% -5.0% -1.3% Pre-tax margin 34.4% 34.4% 34.7% 34.3% 32.9% 34.3% % -0.9% Net margin % 26.3% 26.4% 25.3% 26.5% 1.1% -3.0% 0.4% Figure 48: Holcim Indonesia change of estimates Old New Changes YoY growth Rpbn 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E Total revenue 11,176 12,611 14,142 10,341 11,193 12, % % 6.8% % Gross profit 4,158 4,685 5,270 3,183 3,386 3, % -27.7% -24.9% -5.1% 6.4% 16.9% Operating profit 2,312 2,596 2,926 1,575 1,676 1, % -35.4% -31.8% % 19.0% Pre-tax profit 2,093 2,337 2,785 1,211 1,214 1, % -48.0% -44.8% 7.4% 0.3% 26.7% Net profit 1,506 1,682 2, , % -44.8% % 26.7% Margin analysis: Gross % 30.8% 30.3% 30.7% Operating 20.7% 20.6% 20.7% % 15.5% Pre-tax 18.7% 18.5% 19.7% 11.7% 10.8% 11.9% Net 13.5% 13.3% % 7.8% 8.6% Indonesia Cement Sector 17

18 Asia Pacific / Indonesia Cement Semen Indonesia Rating OUTPERFORM* Price (27 Feb 15, Rp) 14,875 Target price (Rp) (from 19,100) 18,800¹ Upside/downside (%) 26.4 Mkt cap (Rp bn) 88,231.4 (US$ 6.8) Enterprise value (Rp bn) 87,995 Number of shares (mn) 5, Free float (%) week price range 17, ,100.0 ADTO - 6M (US$ mn) 8.7 *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ¹Target price is for 12 months. Share price performance Research Analysts Ella Nusantoro ella.nusantoro@credit-suisse.com Price (LHS) Rebased Rel (RHS) Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov The price relative chart measures performance against the JSX COMPOSITE INDEX which closed at on 24/02/15 On 24/02/15 the spot exchange rate was Rp12865./US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) (SMGR.JK / SMGR IJ) Diverse plant location Earnings adjusted. We adjust our earnings estimates, with estimated volume growth of 5% and flat ASP in 2015E, and 8% volume growth and higher ASP in 2016E. Semen Indonesia (SI) should continue to have a healthy balance sheet, supported by positive free cash flow. Its diversified plants' location enable it to serve the market within bigger geographic locations compared to other players. Greenfield and brownfield plant is under development. SI is currently constructing a greenfield plant at Rembang, Central Java, and a brownfield plant at Padang, South Sumatra, which are expected to be completed by 3Q16. SI has a total capacity of 35.2 mtpa (+21%) by the end of 2016 in Indonesia, once its new plants are completed. Implementation of GoI infrastructure projects should provide demand growth. With Jokowi being aggressive on infrastructure projects, we believe there is room for demand growth to outpace supply. With 63% higher budget approved for infrastructure this year (to Rp290 tn), this would result in higher cement demand. Our preferred stock. Semen Indonesia continues to be our top pick within Indonesia's cement sector with its diverse plant location. Our new target price for Semen Indonesia is Rp18,800 (12x EV/EBITDA 2015E, 20x P/E 2015E, EV/capacity of US$281/t in 2015E with 17% earnings growth over the next two years; from Rp19,100), based on 2011/2012 valuations, when cement demand soared to 2x GDP growth. We will likely see a similar boost to demand going forward. We maintain our OUTPERFORM rating on the stock. Financial and valuation metrics Year 12/13A 12/14E 12/15E 12/16E Revenue (Rp bn) 24, , , ,743.7 EBITDA (Rp bn) 8, , , ,108.4 EBIT (Rp bn) 7, , , ,753.8 Net profit (Rp bn) 5, , , ,486.9 EPS (CS adj.) (Rp) , Change from previous EPS (%) n.a Consensus EPS (Rp) n.a ,149 EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) P/B (x) ROE (%) Net debt/equity (%) net cash net cash Source: Company data, Thomson Reuters, Credit Suisse estimates. Indonesia Cement Sector 18

19 Semen Indonesia SMGR.JK / SMGR IJ Price (27 Feb 15): Rp14,875, Rating: OUTPERFORM, Target Price: Rp18,800, Analyst: Ella Nusantoro Target price scenario Scenario TP %Up/Dwn Assumptions Upside 15, Risk free rate of 6.5% Central Case 18, Risk free rate of 7.5% Downside 12, (15.97) Risk free rate of 8.5% Income statement (Rp bn) 12/13A 12/14E 12/15E 12/16E Sales revenue 24,501 26,248 28,391 31,744 Cost of goods sold 13,557 14,745 16,162 17,955 SG&A 3,879 4,354 4,663 5,035 Other operating exp./(inc.) (1,074) (1,335) (1,775) (2,355) EBITDA 8,139 8,484 9,341 11,108 Depreciation & amortisation 1,076 1,335 1,775 2,355 EBIT 7,063 7,148 7,566 8,754 Net interest expense/(inc.) Non-operating inc./(exp.) Associates/JV 34.5 Recurring PBT 6,920 6,947 7,356 8,364 Exceptionals/extraordinaries Taxes 1,566 1,572 1,665 1,893 Profit after tax 5,354 5,375 5,691 6,471 Other after tax income Minority interests (15.9) (15.9) (15.9) (15.9) Preferred dividends Reported net profit 5,370 5,391 5,707 6,487 Analyst adjustments Net profit (Credit Suisse) 5,370 5,391 5,707 6,487 Cash flow (Rp bn) 12/13A 12/14E 12/15E 12/16E EBIT 7,063 7,148 7,566 8,754 Net interest Tax paid Working capital (250.9) (527.6) (241.5) Other cash & non-cash items (6,347) (6,525) (9,117) (11,213) Operating cash flow (1,440) (2,701) Capex (3,240) (3,677) (6,590) (8,697) Free cash flow to the firm (2,775) (3,581) (8,030) (11,397) Disposals of fixed assets Acquisitions Divestments Associate investments Other investment/(outflows) Investing cash flow (3,240) (3,677) (6,590) (8,697) Equity raised Dividends paid (2,181) (2,417) (2,426) (2,568) Net borrowings (88) (878) (354) 1,693 Other financing cash flow 2,636 2,547 2,573 2,733 Financing cash flow 367 (747) (208) 1,858 Total cash flow (2,409) (4,328) (8,238) (9,540) Adjustments Net change in cash (2,409) (4,328) (8,238) (9,540) Balance sheet (Rp bn) 12/13A 12/14E 12/15E 12/16E Cash & cash equivalents 4,213 3,562 1,914 1,071 Current receivables 2,329 2,391 2,574 2,884 Inventories 2,646 2,863 3,035 3,428 Other current assets Current assets 9,972 9,589 8,360 8,319 Property, plant & equip. 18,863 21,418 26,234 32,576 Investments Intangibles 1,158 1,158 1,158 1,158 Other non-current assets Total assets 30,793 32,760 36,365 42,701 Accounts payable 2,823 2,428 2,781 3,083 Short-term debt Current provisions Other current liabilities 1,236 1,369 1,523 1,724 Current liabilities 5,298 4,568 5,098 5,659 Long-term debt 3,242 2,834 2,479 4,170 Non-current provisions Other non-current liab Total liabilities 8,989 7,865 8,056 10,325 Shareholders' equity 20,532 23,507 26,788 30,707 Minority interests 921 1,039 1,170 1,319 Total liabilities & equity 30,793 32,760 36,365 42,701 Key earnings drivers 12/13A 12/14E 12/15E 12/16E Real GDP growth (%) Inflation (%) Per share data 12/13A 12/14E 12/15E 12/16E Shares (wtd avg.) (mn) 5,932 5,932 5,932 5,932 EPS (Credit Suisse) (Rp) ,094 DPS (Rp) BVPS (Rp) 3,462 3,963 4,516 5,177 Operating CFPS (Rp) (243) (455) Key ratios and 12/13A 12/14E 12/15E 12/16E valuation Growth(%) Sales revenue EBIT Net profit EPS Margins (%) EBITDA EBIT Pre-tax profit Net profit Valuation metrics (x) P/E P/B Dividend yield (%) P/CF (61) (33) EV/sales EV/EBITDA EV/EBIT ROE analysis (%) ROE ROIC Asset turnover (x) Interest burden (x) Tax burden (x) Financial leverage (x) Credit ratios Net debt/equity (%) (2.2) (0.9) Net debt/ebitda (x) (0.06) (0.03) Interest cover (x) Source: Company data, Thomson Reuters, Credit Suisse estimates. 12MF P/E multiple Source: IBES 12MF P/B multiple Indonesia Cement Sector 19

20 Figure 49: SI Production capacity (mn tonnes) Figure 50: SI Utilisation rate 106% % 100% 97% 94% 101% 100% 99% 99% 98% 97% 94% 10 99% 97% 95% E 2017E Prod capacity (mn tonne) Additional prod capacity (mn tonne) 91% 88% 85% 91% 88% E 2017E Source: Indonesia Cement Association, Company data, Credit Suisse estimates Figure 51: SI FY14 consumption, by region Nusa Tenggara 5% Sulawesi 11% East Indonesia 3% Source: Indonesia Cement Association, Company data, Credit Suisse estimates Figure 52: SI Domestic market share 47% 46% 46% 45% 45% 45% 44% Kalimantan 9% Java 5 44% 43% 44% 43% 44% 44% Sumatra 20% 4 41% 41% 41% 40% Source: Indonesia Cement Association (ASI) Source: Indonesia Cement Association, Company data, Credit Suisse estimates Indonesia Cement Sector 20

21 Figure 53: SI Sales volume vs ASP Figure 54: SI Margins comparables % 45% 40% 35% 30% 25% E 2017E % E 2015E 2016E 2017E Sales volume (mn tonne) ASP (Rp'000 per tonne) Gross margin (%) Operating margin (%) EBITDA margin (%) Source: Indonesia Cement Association, Company data, Credit Suisse estimates Source: Indonesia Cement Association, Company data, Credit Suisse estimates Indonesia Cement Sector 21

22 Asia Pacific / Indonesia Cement Indocement Rating NEUTRAL Price (27 Feb 15, Rp) 24,050 Target price (Rp) (from 25,700) 25,600¹ Upside/downside (%) 6.4 Mkt cap (Rp bn) 88,533.6 (US$ 6.9) Enterprise value (Rp bn) 78,906 Number of shares (mn) 3, Free float (%) week price range 26, ,025.0 ADTO - 6M (US$ mn) 6.0 *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ¹Target price is for 12 months. Share price performance Price (LHS) Research Analysts Ella Nusantoro ella.nusantoro@credit-suisse.com Rebased Rel (RHS) Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov The price relative chart measures performance against the JSX COMPOSITE INDEX which closed at on 24/02/15 On 24/02/15 the spot exchange rate was Rp12865./US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) (INTP.JK / INTP IJ) Expansion is still underway Earnings adjusted. We adjust our earnings estimates, with estimated volume growth of 5% and flat ASP in 2015E and 8% volume growth and 3% higher ASP in 2016E. Indocement continues to have a healthy balance sheet, with a net cash position of Rp869 bn in 2015E, and minimal debt. Expansion is still under way. In 2014, Indocement reported domestic volume at 18.2 mn t, which is estimated to be running at a 90% utilisation rate, on the back of a 20.5 mn tpa capacity. Indocement has just recently added 1.9 mtpa cement mill in May this year, and plans to raise capacity to 24.9 mtpa (+2) by the end of 2015 with the completion of the Citeureup plant expansion. Implementation of GoI infrastructure projects should provide demand growth. With Jokowi being aggressive on infrastructure projects, we believe there is room for demand growth to outpace supply. With 63% higher budget approved for infrastructure this year (to Rp290 tn), this would result in higher cement demand. Maintain NEUTRAL rating. Our new target price for Indocement is Rp25,600 (11x EV/EBITDA 2015E, 17x P/E 2015E, EV/capacity of US$315/t in 2015E with 17% earnings growth over the next two years; from Rp25,700), based on 2011/2012 valuations, when cement demand rose to 2x GDP growth. We will likely see a similar boost to demand going forward. However, we like the company and maintain our NEUTRAL rating due to its valuation. Financial and valuation metrics Year 12/13A 12/14E 12/15E 12/16E Revenue (Rp bn) 18, , , ,490.3 EBITDA (Rp bn) 6, , , ,761.8 EBIT (Rp bn) 6, , , ,514.5 Net profit (Rp bn) 5, , , ,478.6 EPS (CS adj.) (Rp) 1, , , , Change from previous EPS (%) n.a Consensus EPS (Rp) n.a. 1,406 1,480 1,708 EPS growth (%) P/E (x) Dividend yield (%) EV/EBITDA (x) P/B (x) ROE (%) Net debt/equity (%) net cash net cash net cash net cash Source: Company data, Thomson Reuters, Credit Suisse estimates. Indonesia Cement Sector 22

23 Indocement INTP.JK / INTP IJ Price (27 Feb 15): Rp24,050, Rating: NEUTRAL, Target Price: Rp25,600, Analyst: Ella Nusantoro Target price scenario Scenario TP %Up/Dwn Assumptions Upside 23, (2.70) Risk free rate of 6.5% Central Case 25, Risk free rate of 7.5% Downside 18, (23.91) Risk free rate of 8.5% Income statement (Rp bn) 12/13A 12/14E 12/15E 12/16E Sales revenue 18,691 20,163 21,751 24,490 Cost of goods sold 10,037 11,096 12,127 13,461 SG&A 2,591 3,005 3,220 3,515 Other operating exp./(inc.) (771) (1,052) (1,174) (1,247) EBITDA 6,835 7,114 7,577 8,762 Depreciation & amortisation 771 1,052 1,174 1,247 EBIT 6,064 6,062 6,403 7,514 Net interest expense/(inc.) (513.3) (840.3) (730.0) (872.5) Non-operating inc./(exp.) Associates/JV Recurring PBT 6,595 6,921 7,154 8,410 Exceptionals/extraordinaries Taxes 1,583 1,592 1,645 1,934 Profit after tax 5,012 5,329 5,509 6,476 Other after tax income Minority interests (2.1) (2.2) (2.4) (2.7) Preferred dividends Reported net profit 5,014 5,331 5,511 6,479 Analyst adjustments Net profit (Credit Suisse) 5,014 5,331 5,511 6,479 Cash flow (Rp bn) 12/13A 12/14E 12/15E 12/16E EBIT 6,064 6,062 6,403 7,514 Net interest Tax paid 1,583 1,592 1,645 1,934 Working capital Other cash & non-cash items (2,375) (2,110) (2,094) (2,595) Operating cash flow 5,785 6,384 6,685 7,726 Capex (1,980) (4,953) (1,827) (1,101) Free cash flow to the firm 3,805 1,431 4,858 6,625 Disposals of fixed assets Acquisitions Divestments Associate investments Other investment/(outflows) (215.5) (825.7) (128.8) (238.6) Investing cash flow (2,196) (5,779) (1,956) (1,339) Equity raised (16.6) Dividends paid (1,661) (3,313) (3,523) (3,641) Net borrowings (0.4) (67.3) Other financing cash flow (13.0) Financing cash flow (1,468) (3,387) (3,498) (3,546) Total cash flow 2,121 (2,782) 1,231 2,841 Adjustments Net change in cash 2,121 (2,782) 1,231 2,841 Balance sheet (Rp bn) 12/13A 12/14E 12/15E 12/16E Cash & cash equivalents 12,595 9,813 11,044 13,885 Current receivables 2,519 2,526 2,793 3,153 Inventories 1,474 2,038 2,110 2,234 Other current assets Current assets 16,846 14,656 16,248 19,611 Property, plant & equip. 9,305 13,206 13,859 13,712 Investments Intangibles Other non-current assets Total assets 26,607 28,366 30,667 33,968 Accounts payable 1,375 1,222 1,410 1,606 Short-term debt 67.3 Current provisions Other current liabilities Current liabilities 2,740 2,487 2,776 3,143 Long-term debt Non-current provisions Other non-current liab Total liabilities 3,599 3,352 3,659 4,113 Shareholders' equity 22,947 24,949 26,937 29,775 Minority interests Total liabilities & equity 26,577 28,334 30,632 33,928 Key earnings drivers 12/13A 12/14E 12/15E 12/16E Real GDP growth (%) CPI Inflation (%) Per share data 12/13A 12/14E 12/15E 12/16E Shares (wtd avg.) (mn) 3,681 3,681 3,681 3,681 EPS (Credit Suisse) (Rp) 1,362 1,448 1,497 1,760 DPS (Rp) BVPS (Rp) 6,234 6,777 7,317 8,088 Operating CFPS (Rp) 1,572 1,734 1,816 2,099 Key ratios and 12/13A 12/14E 12/15E 12/16E valuation Growth(%) Sales revenue EBIT 3.2 (0.0) Net profit EPS Margins (%) EBITDA EBIT Pre-tax profit Net profit Valuation metrics (x) P/E P/B Dividend yield (%) P/CF EV/sales EV/EBITDA EV/EBIT ROE analysis (%) ROE ROIC Asset turnover (x) Interest burden (x) Tax burden (x) Financial leverage (x) Credit ratios Net debt/equity (%) (53.7) (38.5) (40.3) (45.9) Net debt/ebitda (x) (1.81) (1.35) (1.43) (1.56) Interest cover (x) (11.8) (7.2) (8.8) (8.6) Source: Company data, Thomson Reuters, Credit Suisse estimates. 12MF P/E multiple Source: IBES 12MF P/B multiple Indonesia Cement Sector 23