25 July 2025
Reignites as Cement Demand Rebounds
Market Commentary
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For years, the cement industry has been the market’s “forgotten child.” Domestic demand has declined sharply, with industry utilization falling to just 50–60%, a significant drop from the pre-pandemic 5-year average of 73%. As a result, investors largely lost interest, but we see this as an opportunity.
Recently, Bank Indonesia has started cutting interest rates to 5.25%, with further cuts expected this year. Lower mortgage rates are likely to boost housing demand, while the government’s 3 million housing program is set to drive construction activity nationwide. Gradually, this long-dormant industry is starting to wake up, and sector-wide plant utilization is set to improve.
In our previous sales notes, we highlighted SMGR for its cheap valuation and high operating leverage. Now, we want to spotlight INTP, which stands out for its superior margins.
About 30% of INTP’s sales come from the private construction sector, a segment that is more rational and less price sensitive. This allows INTP to maintain gross margins of around 30%, well above the ~20% margins of state owned cement players.
INTP is also highly efficient in managing costs. Roughly 26% of its energy mix comes from alternative fuels, which are 40–50% cheaper than coal. This makes the company more resilient to energy price volatility compared to peers.
INTP currently holds a net cash position of IDR 2 trillion, which is projected to grow to IDR 5 trillion in the coming years. With minimal capex needs and stable free cash flow, INTP has ample capacity to return value to shareholders. By 2028, it is expected to pay out nearly 100% of earnings as dividends, positioning it as not just a recovery play, but also a long-term dividend compounder.
Valuation remains compelling: INTP trades at 6.8x EV/EBITDA and 0.8x P/BV both well below its 5-year historical averages. Downside risk is limited at these levels, while the upside potential is significant if cement demand continues to recover. As interest rates fall and the national housing program gains traction, INTP is well-positioned to lead the sector’s recovery. Our analyst gives a buy recommendation with a target price of Rp 8600.
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Recently, Bank Indonesia has started cutting interest rates to 5.25%, with further cuts expected this year. Lower mortgage rates are likely to boost housing demand, while the government’s 3 million housing program is set to drive construction activity nationwide. Gradually, this long-dormant industry is starting to wake up, and sector-wide plant utilization is set to improve.
In our previous sales notes, we highlighted SMGR for its cheap valuation and high operating leverage. Now, we want to spotlight INTP, which stands out for its superior margins.
About 30% of INTP’s sales come from the private construction sector, a segment that is more rational and less price sensitive. This allows INTP to maintain gross margins of around 30%, well above the ~20% margins of state owned cement players.
INTP is also highly efficient in managing costs. Roughly 26% of its energy mix comes from alternative fuels, which are 40–50% cheaper than coal. This makes the company more resilient to energy price volatility compared to peers.
INTP currently holds a net cash position of IDR 2 trillion, which is projected to grow to IDR 5 trillion in the coming years. With minimal capex needs and stable free cash flow, INTP has ample capacity to return value to shareholders. By 2028, it is expected to pay out nearly 100% of earnings as dividends, positioning it as not just a recovery play, but also a long-term dividend compounder.
Valuation remains compelling: INTP trades at 6.8x EV/EBITDA and 0.8x P/BV both well below its 5-year historical averages. Downside risk is limited at these levels, while the upside potential is significant if cement demand continues to recover. As interest rates fall and the national housing program gains traction, INTP is well-positioned to lead the sector’s recovery. Our analyst gives a buy recommendation with a target price of Rp 8600.
Written by Boris, the Broker
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