2Q18 results: steep divergence in results mainly from costs – maintain UW
UNDERWEIGHT - Maintained
Author(s):Jovent GIOVANNY +62 (21) 3006 1727, Timothy HANDERSON
SMGR’s 1H18 net profit of Rp971bn (-11% yoy/+36% qoq) was in line. While INTP’s net profit of Rp355bn (-61% yoy/-66% qoq) missed expectations.
Divergence in performance was attributed to strong 2Q results from SMGR, especially on its costs and non-cement business.
Most of the SMGR costs savings came from lower labour (all-time low) and employee costs despite generally seasonally higher 2Q costs (due to bonus before Lebaran).
Despite INTP’s stronger 1H18 volume, cost deviation with SMGR was exceptionally high (despite cement’s high fixed cost nature), which may suggest this was one-off.
Maintain Reduce on both stocks. Catalysts are stronger demand and lower costs.
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