Contact our analyst Revita

22 March 2022

Price Rp 214

Target Price Rp 330 Buy

Investment Consideration

Higher New contract target
WTON is targeting 2022F new contracts of IDR 7.3 trillion compared to
IDR. 5.21 trillion in 2020A. The new contracts target is still dominated by
infrastructure projects. Based on customer profile (% of 2021 revenue),
private is 60.45%, WIKA group 18.82%, SOE 18.04%, and Government
2.69%. WTON continues to do monitoring of production and distribution
schedules to control inventory, disbursement of receivables, securing
contracts, and securing payments. WTON also continues to grow and
develop by launching new products including, CLC (Concrete Level
Crossing), precast for road-level railroad crossings, precast that collects
and absorbs rainwater in the ground to prevent flooding. and SHMS
(Structural health monitoring systems) for detecting the structural health
of a bridge. 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% based on customer
profile. We believe WTON will achieve better results this year through
these strategies and efficiencies.

Targeting a better net margin
WTON 2021 bottom line margin decreased significantly to 1.92%
compared to 2.67% in 2019. This was due to a decrease in the plant
utilization rate from a normal 80-85% to just 42.9% in 2021, lower than
2020’s 51.3%. This resulted in inefficiencies in production costs which
eroded the GPM. Inefficiencies occur when plant utilization is below
normal. As a result, the NPM was down too. We expect that margins will
improve as production and utilization improve in 2022. We are targeting
the 2022F net profit margin to improve to 4.16%.

Valuation: 55% upside
Based on our adjustments, we have a target price of IDR. 330/share,
which is a 6x PER. With 55% potential upside, we maintain BUY.