Nomura raises target price on Indocement

Normura Equity Research has raised its target price on Indonesia’s second largest cement producer PT Indocement Tunngal Prakarsa (INTP)  from IDR23,400 to IDR26,900 (US$2.43 to US$2.79). The research house has maintained its ‘buy’ recommendation on higher production volume and improved enterprise value/EBITDA.

"Despite recent outperformance of the cement sector and INTP's share price, we still favour the sector, as in our view the cement sector and INTP will continue to benefit from rising infrastructure spending and a strong property market," Nomura analyst Andy Lesmana wrote in a note, according to a recent report by Reuters.

Nomura expects local cement companies to raise prices, partly to pass on the impact of potentially higher operating costs as well as due to higher demand and tight supply.

"We also expect that additional volume from INTP's new plant, which INTP expects to complete in 4Q13, to be a catalyst for the share price," it added

Indocement, part of the HeidelbergCement Group, is currently working on adding some 6.3Mta of additional capacity by 2015. Projects include new cement mills with capacity of 1.9Mta under construction in Citeureup. The company is also under final stage to start the construction of a brownfield cement factory with the production capacity of 4.4Mta in the Citeureup area. In addition, the company is under final study to construct two new greenfield cement factories with the production capacity of 2-2.5Mta, one in Central Java and one in outer Java.