馃彔 $ARNA Plant 2 Site Visit: A clearer path ahead*
_Michael, Edward, Verdhana_
_We visited *ARNA's Plant 2* in West Java, where they are currently in the process of *replacing their old production lines with new technology* . We were also provided with insights on what the company sees as the *"light at the end of the tunnel" post anti-dumping & SNI regulations* starting to take into effect._
馃摑 *Industry updates*
- Post anti-dumping and SNI regulations, the industry has been seeing an *uptrend in demand* , from the perspective of ASP and volume.
> ASP: *Chinese-imported white-body price is now above those of local players* , such as ARNA (~IDR69,000/sqm vs IDR72,000/sqm)
> Volume: Industry utilization, which was at ~65%, has now *improved to above 70% utilization.*
- In FY23, Indonesia imported ~90mn sqm of white-body ceramics from China. Despite the additional 45mn sqm of volume planned for FY25, the industry still has room to grow to meet the demand gap.
馃摑 *Company guidance*
- ARNA is *guiding FY25F production of ~74mn sqm* , on the back of increasing industry prices and increasing demand and production of rectified red-body ceramics.
- Co is in the process of updating the technology of their production lines in Plants 2 and 3, *aiming for a total of 7 lines with rectification capabilities.*
馃摑 *Tour highlights*
- At Plant 2A, old equipment was being torn down to be replaced with new ones, *boosting production by 30%*.
- 鈦燙o aims to bring Plant 2 *net margins closer to levels of Plant 3, at ~20%*.
- 鈦燙o has secured *favorable payment terms* of the new equipment for 5 years.
_ARNA is currently trading at 10.7x FY25F P/E, with ~5.5% FY25F yield and 23.4% FY25F ROE._