Contact our analyst Revita

23 November 2022

Price Rp 208

Target Price Rp 330 Buy

Investment Consideration

73% of new contract target up to 10M22
WTON has booked new contracts as of Oct 2022 worth IDR. 5.41 trillion
or 73% of the total target for 2022F. Based on sectors, the new contracts
are dominated by infrastructure projects at 61.54%, followed by property
19.95%, Energy 12.84%, Mining 2.78%, and Industry 2.89% . Based on
customer profile (% of 3Q22 revenue), private is 46.9%, WIKA group
20.6%, SOE 24.2%, and Foreign 8.3%. Top 5 new contracts up to Oct
2022 include Ancol Timur-Pluit toll road worth IDR 776.17 billion, Manyar
Smelter project worth IDR 243 billion, Electricity distribution network IDR
322.60 billion, Manyar Smelter project IDR.257.60 billion, FRC IK
Karawang Pindo 4 miles IDR.182.75 billion and Semarang Demak toll
road IDR. 172.55 billion. WTON continues to grow and develop by
launching new products. In 2022, WTON will also look to enter new
markets such as a railway project in the Philippines, sell new products,
and increase WIKA group projects which are targeted to reach 30% of
revenue.

Targeting better margins
WTON 9M22 bottom line margin increased slightly to 2.43% compared to
2.18% in 2021. This was due to an increase in the plant utilization rate
from 40.7% in 3Q21 to 60.1% in 3Q22, higher than 3Q20’s 52% This
resulted in a better production cost ratio which increased the GPM to 8%
during 9M22 compared to 4.8% in 9M21. With better utilization, we expect
better margins again in 2023 as WTON is targeted a utilization rate at 70-
80% for 2023F. In the past, Inefficiencies occur when plant utilization is
below normal, reducing the NPM. We expect that margins will improve as
production and utilization rates improve in 2022-2023. We are targeting
the 2022 – 2023F net profit margin to reach 2.61% and 2.70%
respectively.

Valuation: 59% upside
Based on the 9M22 result, we maintain our target price of IDR. 330/share
within 1 year, which is a 22x PER. With 59% potential upside, we
maintain BUY.