Refer to Important disclosures in the lastpage of this report

StockData

Target price (Rp) Rp11,500

Prior TP (Rp) Rp11,500

Shareprice (Rp) Rp10,500

Upside/downside (%) +9.5

Sharesoutstanding (m) 5,932

Marketcap. (US$ m) 4,586

Free float (%) 49.0

Avg. 6m dailyT/O (US$ m) 4.0

Price Performance

3M 6M 12M

Absolute (%) 1.7 19.3 11.7

Relative to JCI (%) -2.8 13.1 1.3

52whigh/low (Rp) 11,025 - 8,050

Major Shareholders

Government 51.0%

Estimate Change; Vs. Consensus

2017F 2018F

Latest EPS (Rp) 434 602

Vs. Prior EPS (%) - -

Vs. Consensus (%) -16.7 -3.2

Source: Bloomberg

Chandra Pasaribu

PT Indo Premier Sekuritas

chandra.pasaribu@ipc.co.id

+62 21 5793 1168

EBITDA margin at the lowest

� Volume grew +9.3% yoy, thanks to infrastructure

� …but EBITDA margin only at 16.6% in 3Q17

� Balance remained intact

� Maintain our Hold call

Result was below expectation. Semen Indonesia booked net income of

Rp1.5tn (-50.2% yoy) in 9M17, below our and consensus numbers due to lower-

than-expected ASP, despite improvement in volume with growth of 9.3% yoy.

Nevertheless, net income grew +5.8% qoq to Rp367bn mostly affected by

seasonality as 2Q17 was a slow from Ramadhan festive seasons. Sales volume

grew 23.4% qoq in 3Q17, but with ASP continued to drop marginally by -1.3%

qoq. Overall, strong volume recovery was not enough to restore profitability

despite it helped to soften ASP decline. We do not expect any speedy recovery in

profitability before industry consolidation.

EBITDA margin at the lowest. In 3Q17, EBITDA margin was 16.6%, which was

historical low for Semen Indonesia. In 2Q17, EBITDA margin was 20.7%, while in

the past before the price war, Semen Indonesia’s EBITDA margin were around

30%. ASP has dropped -7.1% yoy in 9M17 and -1.3% qoq, while manufacturing

cost per ton increased +4.2% yoy and +2.5% qoq. Higher manufacturing was

mainly driven by increase prices in raw materials, energy cost and depreciation.

This increase has outweighed cost improvement in logistics and packaging. With

the price was still exist in the market, Semen Indonesia was forced to absorbed

any cost increase. We expect that consolidation within the industry as such low

EBITDA could not support sustainability.

Net gearing at 19% as of Sep17. Semen Indonesia’s balance sheet remained

healthy despite pressure on profitability. Net gearing of the company stood at

19% as of Sep17 with net debt of Rp5.7tn. We expect that Semen Indonesia

should be able to generate EBITDA of Rp5.5tn in FY17 and Rp6.7tn in Fy18, which

should be sufficient to repay any debt. The company has decided to rationalized

capex as no major capex in required. Semen Indonesia’s balance sheet is

sufficient to support any corporate action in acquisition. We remain confident that

Semen Indonesia will survive current price war.

Hold maintained. We remain cautious on the cement industry due to the

oversupply. Nevertheless, the industry could get positive catalyst if demand from

property improves. However, we remain skeptical that profitability will follow

improvement in demand. To restore profitability, the industry might consolidate

first. We maintain our Hold call on Semen Indonesia due to the healthy state of its

balance despite the pressure on profitability.

Semen Indonesia (SMGR IJ)

02 November 2017

Results Note

HOLD (Unchanged)

Year To 31 Dec 2015A 2016A 2017F 2018F 2019F

Revenue (RpBn) 26,948 26,134 25,784 29,812 34,345

EBITDA (RpBn) 7,265 6,611 5,452 6,708 7,967

EBITDA Growth (%) (11.6) (9.0) (17.5) 23.0 18.8

Net Profit (RpBn) 4,521 4,522 2,576 3,573 4,645

EPS (Rp) 762 762 434 602 783

EPS Growth (%) (18.8) 0.0 (43.0) 38.7 30.0

Net Gearing (%) (0.5) 11.1 9.1 (0.8) (11.0)

PER (x) 13.8 13.8 24.2 17.4 13.4

PBV (x) 2.3 2.0 2.0 1.9 1.7

Dividend Yield (%) 3.6 3.6 3.6 2.1 2.9

EV/EBITDA (x) 8.7 9.5 12.2 9.5 7.6

Source: SMGR, IndoPremier Share Price Closing as of : 1-November-2017

Equity |

Indonesia

| C

em

ent

80

85

90

95

100

105

110

115

120

Nov-1

6

Nov-1

6

Dec-1

6

Jan-1

7

Jan-1

7

Feb-1

7

Mar-

17

Mar-

17

Apr-

17

May-1

7

May-1

7

Jun-1

7

Jul-

17

Aug

-17

Aug

-17

Sep-1

7

Oct-

17

Oct-

17

SMGR-Rebase JCI Index-Rebase

SMGR Results Note

2 Refer to Important disclosures in the last page of this report

Fig. 1: Quarterly sales and volume Fig. 2: Quarterly EBITDA

Source: SMGR Source: SMGR

Fig. 3: Gross and operating margin (%) Fig. 4: Net gearing (%)

Source: SMGR Source: SMGR

Fig. 5: Cost per tons (Rp ) Fig. 6: Volume break down by region

Source: SMGR Source: SMGR

SMGR Results Note

3 Refer to Important disclosures in the last page of this report

Fig 7: 9M17 financial result highlights

9M17 9M16 % 3Q17 2Q17 % FY17 %

Turnover 20,552 19,082 7.7 7,838 6,315 24.1 25,784 79.7

Gross profit 6,049 7,574 (20.1) 2,192 1,914 14.6 8,828 68.5

EBITDA 3,956 5,019 (21.2) 1,302 1,309 (0.5) 5,452 72.6

Operating profit 2,323 3,872 (40.0) 707 720 (1.8) 3,543 65.6

Net Int. & Invest. Inc. (408) (110) 269.6 (213) (132) 60.8 (222) 184.1

Forex gain (losses) - - nm - - nm - nm

Except. & Others 87 106 (17.9) 14 31 nm - nm

Group Pretax 2,002 3,868 (48.2) 509 618 (17.7) 3,321 60.3

Taxation (531) (905) (41.3) (143) (264) (46.0) (731) 72.7

Minorities (11) (35) (68.1) 1 (8) (109.4) (15) 75.5

Net Profit 1,460 2,929 (50.2) 367 346 5.8 2,576 56.7

EBITDA Margin 19.2% 26.3%

16.6% 20.7%

21.1%

Source: SMGR, IndoPremier

SMGR Results Note

4 Refer to Important disclosures in the last page of this report

Year To 31 Dec (RpBn) 2015A 2016A 2017F 2018F 2019F

Income Statement

Net Revenue 26,948 26,134 25,784 29,812 34,345

Cost of Sales (16,302) (16,278) (16,956) (19,044) (21,602)

Gross Profit 10,646 9,856 8,828 10,767 12,743

SG&A Expenses (4,747) (4,882) (5,285) (6,053) (6,855)

Operating Profit 5,899 4,973 3,543 4,715 5,889

Net Interest (129) (180) (222) (113) 90

Forex Gain (Loss) 0 0 0 0 0

Others-Net 80 291 0 0 0

Pre-Tax Income 5,851 5,085 3,321 4,601 5,978

Income Tax (1,325) (550) (731) (1,012) (1,315)

Minorities (4) (13) (15) (16) (18)

Net Income 4,521 4,522 2,576 3,573 4,645

Balance Sheet

Cash & Equivalent 3,992 2,862 (614) 1,362 4,007 Receivable 3,629 4,018 3,964 4,584 5,281 Inventory 2,409 2,671 2,635 3,047 3,510 Other Current Assets 509 822 820 842 868

Total Current Assets 10,539 10,373 6,806 9,835 13,665 Fixed Assets - Net 25,168 30,847 30,088 29,367 28,561 Goodwill 1,134 1,355 1,275 1,195 1,115

Non Current Assets 688 1,280 1,190 1,230 1,275 Total Assets 38,153 44,227 39,871 42,180 45,215 ST Loans 139 819 0 0 0 Payable 3,783 4,078 0 4,652 5,359 Other Payables 1,970 2,263 2,418 2,841 3,333

Current Portion of LT Loans 707 992 0 0 0 Total Current Liab. 6,599 8,152 6,441 7,493 8,692

Long Term Loans 2,997 4,450 2,211 1,105 0 Other LT Liab. 1,116 1,051 35 31 28

Total Liabilities 10,712 13,652 8,687 8,630 8,721 Equity 2,605 2,507 2,051 2,051 2,051 Retained Earnings 23,815 26,528 27,517 29,802 32,661 Minority Interest 1,021 1,539 1,616 1,697 1,782

Total SHE + Minority Int. 27,441 30,574 31,185 33,550 36,494 Total Liabilities & Equity 38,153 44,227 39,871 42,180 45,215

Source: SMGR, IndoPremier

SMGR Results Note

5 Refer to Important disclosures in the last page of this report

Year to 31 Dec 2015A 2016A 2017F 2018F 2019F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 4,525 4,535 2,591 3,589 4,663 Depr. & Amortization 1,366 2,111 1,909 1,993 2,078 Changes in Working Capital 1,128 (801) 21 (243) (274)

Others (224) 1,422 (664) 260 90 Cash Flow From Operating 6,794 7,267 3,856 5,599 6,558

Capital Expenditure (6,173) (8,602) (980) (1,233) (1,238) Others 172 328 57 19 137

Cash Flow From Investing (6,001) (8,274) (923) (1,214) (1,101) Loans 61 2,418 (4,050) (1,105) (1,105) Equity 0 0 0 0 0 Dividends (2,236) (2,261) (2,261) (1,288) (1,786) Others (49) (603) (847) (51) 37

Cash Flow From Financing (2,224) (446) (7,158) (2,445) (2,854) Changes in Cash (1,431) (1,452) (4,224) 1,941 2,603

FinancialRatios

Gross Margin (%) 39.5 37.7 34.2 36.1 37.1

Operating Margin (%) 21.9 19.0 13.7 15.8 17.1 Pre-Tax Margin (%) 21.7 19.5 12.9 15.4 17.4

Net Margin (%) 16.8 17.3 10.0 12.0 13.5 ROA (%) 12.5 11.0 6.1 8.7 10.6 ROE (%) 17.2 15.6 8.3 11.0 13.3 ROIC (%) 16.4 14.4 7.9 11.1 14.1

Acct. Receivables TO (days) 46.4 51.5 54.0 50.0 50.1 Acct. Receivables - Other TO (days) 1.5 1.9 2.5 2.3 2.4

Inventory TO (days) 6.2 6.4 6.4 6.7 6.6 Payable TO (days) 76.3 88.1 87.2 83.1 84.6 Acct. Payables - Other TO (days) 4.6 5.6 6.5 6.2 6.3

Debt to Equity (%) 14.0 20.5 7.1 3.3 0.0 Interest Coverage Ratio (x) 0.1 0.1 0.1 0.0 0.0 Net Gearing (%) (0.5) 11.1 9.1 (0.8) (11.0)

Source: SMGR, IndoPremier

Head Office

PT INDO PREMIER SEKURITAS

Wisma GKBI 7/F Suite 718

Jl. Jend. Sudirman No.28

Jakarta 10210 - Indonesia

p +62.21.5793.1168

f +62.21.5793.1167

INVESTMENT RATINGS

BUY : Expected total return of 10% or more within a 12-month period

HOLD : Expected total return between -10% and 10% within a 12-month period

SELL : Expected total return of -10% or worse within a 12-month 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.