PT Semen Indonesia Tbk (SMGR) received positive support from its subsidiary's synergy with Taiheiyo Cement Corp.

Meanwhile, the economic recovery and an increase in the infrastructure budget will help increase cement sales volume and the company's financial performance this year.

Samuel Sekuritas Indonesia analyst Yosua Zisokhi said Taiheiyo Cement is committed to purchasing cement and clinker products at least one million tons per year. The amount is equivalent to 8.1% of the sales volume of PT Solusi Bangun Indonesia Tbk (SMCB) or SBI, a subsidiary of Semen Indonesia.

Semen Indonesia previously announced plans to release at least 15% of SBI shares to Taiheiyo Cement. SBI will issue new shares at the end of this year's first semester. With the divestment, the company has the potential to raise US$220 million in funds.

Taiheiyo Cement is a global player in the cement business. The company manages 17 factories spread across Japan, China, the United States, Vietnam, and the Philippines.

"This synergy will benefit Semen Indonesia, especially for the development of the cement business abroad," said Yosua in his research.

Semen Indonesia will cooperate with Taiheiyo Cement to develop a clinker plant in Tuban, East Java. Cooperation in the form of construction of new silos and docks.
Also, Taiheiyo Cement is committed to marketing cement and clinker products for Semen Indonesia at least one million tons per year or equivalent to 2.3% of Indonesia's cement production capacity in 2019.

"As many as 500 thousand tons per year from the purchase of clinker will be allocated for export to a subsidiary of Taiheiyo Cement in the United States," said Yosua.
On the other hand, the increase in the company's sales volume will also increase the infrastructure budget in the 2021 State Budget, which reached 47.3%.

"Demand for cement from the infrastructure sector tends to be imported more from Semen Indonesia. Another support comes from the national cement consumption, which this year is estimated to grow by around 6%," said Yosua.

Therefore, Samuel Sekuritas maintained his recommendation to buy SMGR shares with a target price of Rp 13,050. The target price reflects the EV / EBITDA estimate of 10.5 times in 2021. The target price also reflects an estimated increase in sales volume of around 6.9% or 43.5 million tons this year, although the selling price is estimated to be flat.

The target price also considers the projected increase in the company's net profit to Rp2.81 trillion this year compared to last year's estimate of Rp2.26 trillion.
The company's revenue is also estimated to increase to Rp38.76 trillion in 2021 compared to the 2020 estimate of Rp36.45 trillion.