$INTP = A Turn Around Story

- LOWER INPUT COST, as 100% coal purchased in Q1 is at DMO price (INTP uses 92% 4200 LCV coal compared to only 45% in 2018). Conservative guidelines from the management is to have at least 60-70% of it's coal be bought at DMO price compared to just 28% in 2022.
- Energy cost accounted for 52% of INTP's COGS (GPM 32%, COGS 68%), DMO price is 15-20% lower than market, 50-60% of INTP's coal bought in 2H22 is at DMO price, thus net profit margin expansion in Q1 should be about 2-4% (50% of additional coal bought at DMO x 15-20% lower coal price x 52% Energy cost of COGS x 68% to get NPM margin).
-INTP Q4 2022 NPM is at 19,1%, FY22 is at 11,28%. 23Q1 NPM easily be at 13-14% given above arguments.
- Q1 2023 Domestic cement sales volume reached 14,3 Mio ton (INTP expected market share 27%).
Thus, INTP's forecast cement sales Q1 = 4 tons.
- Given equal ASP, INTP's Q1 top line should reached IDR 3,79 T and with 14%NPM, net profit is at IDR 500Bio, 23Q1EPS is at 145 as INTP buyback their shares in the past years, # floating shares is now at 3,431,073,399.
EPS 145 vs 50, a 290% year-on-year improvement!

We forecast, INTP FY23 bottom line at 2,5T (EPS = 728), 17-18x PE ratio, Target price 13000.

what we like: +strong balance sheet, +premium segmentation, +net-cash position, +high yield dividend, +trusted management = parent company Heidelberg AG
risk to our call: -lower market share, -higher coal price, -lower domestic cement sales volume, -higher interest rate. (cement consumption is highly correlated with property and infra sector, higher interest rate = slower growth in property and infra sector as payback diminished and cost of debt raises)