9 October 2026

BUY 70% Upside

Price Rp 1570

Target price Rp 2680

Investment Considerations

Resilient Cement Sales Support Recovery

• Indonesia’s cement industry recorded strong growth in 1H26, with domestic demand increasing 10.2% YoY to 29.9 million tonnes, supported by improving construction activity during the dry season.
• In line with the stronger domestic cement market, SMGR delivered an improved operational performance in 2Q26, supported by recovering domestic demand, higher selling prices, and a gradual recovery in retail activity.
• In 2Q26, SMGR’s total sales volume increased 9.5% YoY to 9.56 million tonnes, while domestic sales volume rose 13.7% YoY. In 1H26, domestic sales increased 9.7% YoY to 14.18 million tonnes. Bag cement volumes increased 11.2%, supported by resilient retail demand and strength across key markets, while bulk cement volumes rose 5.6%, supported by stronger private investment and construction activity.
• Pricing also remained supportive, with domestic and export ASP increasing 6.9% and 15.0% YoY, respectively, lifting blended ASP by 7.2%. SMGR implemented two price increases during 1H26, while domestic market share remained broadly stable at 46.2% compared with 46.5% in 1H25. Momentum moderated in July. Domestic cement demand increased 5.9% YoY to 6.14 million tonnes, while SMGR’s domestic cement sales declined slightly by 0.9% YoY to 2.77 million tonnes. Nevertheless, total group sales increased 2.4% YoY to 3.26 million tonnes. During January-July 2026, SMGR’s domestic sales increased 7.8% YoY to 16.95 million tonnes, while exports declined 10.8% YoY to 3.53 million tonnes. Total group sales increased 5.1% YoY to 21.54 million tonnes.
• Looking into 2H26, management expects a stronger contribution from government projects, including Sekolah Rakyat, Koperasi Merah Putih, Kampung Nelayan, and toll-road projects, alongside continued private-sector demand. Regional demand remains stronger in Sumatra, while Kalimantan remains relatively challenging due to slower IKN activity.
• We expect the earnings recovery to be driven by four key factors: continued domestic volume growth, the full impact of higher ASP, normalization of coal supply, and incremental demand from government and private-sector projects.

Lower Finance Costs  Support Earnings recovery

• SMGR’s revenue increased 13.1% YoY to IDR17.65 trillion in 1H26. In 2Q26, revenue increased 17.7% YoY and 12.9% QoQ to IDR9.36 trillion, supported by higher ASP and sales volumes.
• Net profit surged 471% YoY to IDR228.3 billion in 1H26. In 2Q26, SMGR recorded net profit of IDR147.9 billion, compared with a net loss of IDR2.6 billion in 2Q25, supported by higher selling prices, improved operating efficiency, and significantly lower financing costs.
• Profit before tax increased 340% YoY to IDR236.1 billion in 2Q26, with the improvement supported by an 80% YoY decline in financing costs to IDR163 billion from IDR816 billion in 2Q25.
• Gross margin improved to 22.7% in 2Q26 from 19.8% in 2Q25 and 20.1% in 1Q26. Operating margin also improved to 2.5%, compared with 0.7% in 2Q25 and 1.9% in 1Q26.
• Cost inflation, however, remains a key concern. Cost of revenue increased 11.1% YoY in 1H26 and 13.4% YoY in 2Q26. Cost per tonne increased 5.2% YoY to approximately IDR758,000 in 1H26 and 3.6% YoY to approximately IDR757,000 in 2Q26, reflecting higher raw material, labour, and fuel and energy costs.
• Management highlighted temporary coal-supply constraints in July, although availability has improved since late July. Management continues to monitor both coal supply and pricing.
• Following the consolidation of ten subsidiaries into two principal businesses in August 2026, comprising ready-mix operations under PT Varia Usaha Beton and distribution and logistics under PT Semen Indonesia Distributor, SMGR is continuing to streamline its operations. The company also plans to gradually exit TLCC Vietnam from 2027, allowing greater focus on its domestic operations

Valuation: Maintain BUY, higher TP of IDR 2,680 (+70% Upside)

• We maintain our BUY recommendation and raise our target price to IDR2,680 per share. Based on the report price of IDR1,570, our target price implies approximately 70% upside.
• Our target price is based on a 2027F P/E multiple of approximately 31x, reflecting expectations for a gradual recovery in domestic cement demand, earnings, and margins. SMGR’s 2027F net profit is forecast to increase 22.1% YoY to IDR588 billion, with EBITDA margin improving to 13.6% from 12.9% in 2026F.

• SMGR Q1 2026