Indonesian September sales rise 34.4 per cent YoY

Indonesian cement sales in September surged to a record high in September after dipping a month ago due to fewer working days during the Muslim festivities, data from the country's largest cement producer PT Semen Gresik Tbk showed on Friday.    

September sales soared 34.4 percent from a year ago to 5.2Mt boosted by increasing monthly sales in main islands of Java and Sumatra, the data said. While sales in the island of Moluccas and Papua fell 21.7 percent on a monthly basis.    

"We expect domestic volume growth of 12.6 per cent in 2012 and 10.8 percent in 2013, helped by strong marketing sales," said Teguh Hartanto, an analyst for Bahana Securities in Jakarta, in a report. "An expected slowdown in 2013 mortgage growth is mainly driven by lower selling prices rather than volumes per se."     

A central bank survey showed consumer confidence index strengthened in September due to rising optimism on jobs in infrastructure sectors within the next six months.

Morgan Stanley Research said it is positive on Indonesia's cement sector as there are signs of higher infrastructure spending and as the industry's growth prospects remained intact, underpinned by the higher-than-expected September sales.

"Accelerated infrastructure spending would not only drive cement demand higher, but would also increase demand sustainability, supporting higher multiples for the cement stocks, as long-term earnings visibility increases," Morgan Stanley said in a note on Friday.

The research house said the industry's underlying growth remains intact despite weaker trends from June to August. But it may not be sustainable and the fall in coal and CPO prices suggests a potential decline in rural incomes, which could affect cement demand negatively.

Morgan Stanley's top pick in the sector is PT Semen Gresik , as the company is best positioned to capitalise on strong demand and deliver above-industry volume and earnings growth. PT Indocement Tunggal Prakarsa also offers earnings growth on higher estimated 2013 volume, it said.