Wika Beton (WTON IJ) BUY (Unchanged) Equity Indonesia Construction. In-line result with increased capacity. Results Note.

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1 Wika Beton (WTON IJ) BUY (Unchanged) 03 May 2018 Results Note Equity Indonesia Construction Stock Data Target price (Rp) Rp750 Prior TP (Rp) Rp750 Shareprice (Rp) Rp464 Upside/downside (%) Sharesoutstanding (m) 9 Marketcap. (US$ m) 0 Free float (%) 23.8 Avg. 6m dailyt/o (US$ m) 0.9 Price Performance 3M 6M 12M Absolute (%) Relative to JCI (%) w high/low (Rp) May17 May17 Jun17 Jul17 Jul17 Aug17 Sep17 Sep17 Oct17 Nov17 Nov17 Dec17 Jan18 Jan18 Feb18 Mar18 Apr18 Apr18 WTONRebase JCI IndexRebase Major Shareholders Wijaya Karya 60.0% Public 23.8% Yayasan Wijaya Karya 10.9% Estimate Change; Vs. Consensus Latest EPS (Rp) Vs. Prior EPS (%) Vs. Consensus (%) Source: Bloomberg Inline result with increased capacity 1Q18 Earnings of Rp58bn (+13% yoy), within expectation. Achieved of FY18 contract target of Rp7.8tn. Increased production capacity by 300k ton during 1Q18. Maintain Buy with TP of Rp750. 1Q18 earnings inline with our forecast. WTON reported earnings of Rp58bn (+13% yoy) in 1Q18, inline with market expectation, forming 14% of consensus FY18 forecast. Revenue grew by 64% yoy to Rp1.2tn in 1Q18, supported by spun concrete and service segment growth of 76% and 91% yoy to Rp609bn and Rp119bn, respectively. However, WTON s margins were compressed all accross the board with gross, operating, and net margin stands at 11.5%, 9.0%, and 4.8% (1Q17: 13.9%, 11.2%, and 7%). WTON s margin compression was mostly contributed from: 1) increase in COGS from production cost hike of 105% yoy to Rp305bn, and 2) other expense of Rp12bn in 1Q18, from booking other income of Rp2bn in 1Q17. Achieved of FY18 contract target of Rp7.8tn in1q18. WTON booked new contract of Rp1.5tn (+45% yoy) in 1Q18, represents of our FY18 new contract assumption of Rp7.8tn. In April 2018, WTON has signed a Joint Operation (JO) with PT Bosowa Marga Nusantara to construct AP Pettarani elevated toll road in Makassar with total contract worth Rp1.8. WTON will act as the main contractor for the project to construct the 4.3km elevated toll road. With the new contract signed and WTON s contract carryover of Rp5.4tn from 2017, company has secured order book of Rp8.7tn (41% yoy) in 4M18. Production optimization of two existing plants in 1Q18. During 1Q18 WTON has increased their capacity by 300k tons to 3.3mn ton/year (+10% yoy), which is inline with our forecast. The addition capacity came from the optimization of its two plants in South Lampung, South Sumatera and Boyolali, Central Java of 200k and 100k tons, respectively. In addition, given its high capacity utilization rate of 113% in FY17, management is targeting to reach production capacity of 3.4mn tons by the end of Maintain Buy with unchanged TP of Rp750. WTON is our top pick in precast sector given its stable growth, diverse customer base and strategic factories which allows company to average utilization rate of 80% in FY14FY17 (WTON: 60%) We maintain our Buy call on WTON with TP of Rp750 representing FY18F PE of 14.9x. (Key risk to our call might come from lower than expected new contract achievement). Joey Faustian PT Indo Premier Sekuritas joey.faustian@ipc.co.id Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (RpBn) 3,482 5,362 5,797 6,868 8,115 EBITDA (RpBn) ,020 1,208 EBITDA Growth (%) Net Profit (RpBn) EPS (Rp) EPS Growth (%) Net Gearing (%) PER (x) PBV (x) Dividend Yield (%) EV/EBITDA (x) Source: WTON, IndoPremier Share Price Closing as of : 3May2018

2 Fig. 1: Net profit to grow by 10% CAGR FY17FY19F Fig. 2: Revenue to grow by 7% CAGR FY17FY19F (Rp bn) % 24% 30% 21% 47% 2015A 2016A 2017F 2018F 2019F Net profit growth (%) 80% 60% 40% 0% 40% 60% (Rp bn) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Revenue Growth 54% 31% 18% 8% 19% 2015A 2016A 2017A 2018F 2019F 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 10.0% 20.0% 30.0% Fig. 3: Production capacity grew by Fig. 4: Order book to grow by 8% CAGR FY17FY19F Production capacity Growth (Rp tn) Carry over New contract % % % 13% 10% 2.0 9% % 5% 0.5 6% 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F 25% 15% 10% 5% 0% A 2014A 2015A 2016A 2017A 2018F 2019F Fig. 5: WTON margins trend Fig. 6: WTON averaged higher utilization rate 16.0% 1 113% 14.0% 12.0% 10.0% 100% 80% 75% 72% 75% 95% 90% 8.0% 6.0% 4.0% 2.0% 60% 40% 58% 64% 59% 71% 70% 71% 0.0% 0% 2015A 2016A 2017F 2018F 2019F 2014A 2015A 2016A 2017F 2018F 2019F Gross margin Operating margin Net margin WSBP WTON 2

3 Fig. 7: WTON's 1Q18 earnings (Rp bn) 1Q18 1Q17 YoY 3Q17 QoQ % of Ours % of Consensus Revenue 1, % 1,937 62% 21% COGS (1,056) (628) 68% (1,704) 62% Gross profit % % 17% 17% Operating profit % % 17% 17% Net profit % % 13% 14% Gross margin 11.5% 13.9% 5.2% Operating margin 9.0% 11.2% 2.7% Net margin 4.8% 7.0% 6.0% 3

4 Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement Net Revenue 3,482 5,362 5,797 6,868 8,115 Cost of Sales (2,977) (4,696) (5,005) (5,921) (6,980) Gross Profit ,135 SG&A Expenses (96) (136) (157) (183) (214) Operating Profit Net Interest (40) (85) (77) (92) (71) Forex Gain (Loss) 0 (1) OthersNet (16) (9) (15) (17) (19) PreTax Income Income Tax (71) (95) (110) (130) (154) Minorities (9) (3) Net Income Balance Sheet Cash & Equivalent ,139 1,656 Receivable 663 1,228 1,431 1,626 1,820 Inventory 694 1,034 1,140 1,211 1,357 Other Current Assets 740 1,451 1,605 1,927 2,143 Total Current Assets 2,440 4,351 5,130 5,902 6,976 Fixed Assets Net 2,222 2,683 2,957 3,268 3,514 Goodwill Non Current Assets Total Assets 4,662 7,067 8,122 9,212 10,540 ST Loans 350 1,245 1,275 1,511 1,785 Payable 664 1, ,408 1,678 Other Payables 730 1,548 1,657 1,951 2,291 Current Portion of LT Loans Total Current Liab. 1,864 4,216 4,361 4,990 5,874 Long Term Loans Other LT Liab Total Liabilities 2,172 4,320 5,026 5,704 6,492 Equity 1,743 1,741 1,741 1,741 1,741 Retained Earnings ,274 1,676 2,204 Minority Interest Total SHE + Minority Int. 2,490 2,748 3,098 3,509 4,049 Total Liabilities & Equity 4,662 7,068 8,123 9,214 10,541 Source: WTON, IndoPremier 4

5 Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Cash Flow Net Income (Excl.Extraordinary&Min.Int) Depr. & Amortization Changes in Working Capital (430) 221 (241) (47) 143 Others (368) (117) (373) 95 (46) Cash Flow From Operating (381) ,062 Capital Expenditure (357) (670) (500) (574) (540) Others Cash Flow From Investing (341) (666) (477) (554) (518) Loans Equity Dividends (52) (82) (101) (132) (160) Others (50) (87) (90) (102) (82) Cash Flow From Financing (88) Changes in Cash (685) 562 (145) Financial Ratios Gross Margin (%) Operating Margin (%) PreTax Margin (%) Net Margin (%) ROA (%) ROE (%) ROIC (%) Acct. Receivables TO (days) Acct. Receivables Other TO (days) Inventory TO (days) Payable TO (days) Acct. Payables Other TO (days) Debt to Equity (%) Interest Coverage Ratio (x) Net Gearing (%) Source: WTON, IndoPremier 5

6 Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta Indonesia p f INVESTMENT RATINGS BUY : Expected total return of 10% or more within a 12month period HOLD : Expected total return between 10% and 10% within a 12month period SELL : Expected total return of 10% or worse within a 12month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMERS This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.