Nomura Equity Research cut its target price on PT Gudang Garam Tbk to 65,000 rupiah from 67,500 rupiah, citing concerns about the cigarette maker's ability to raise average selling prices.
"We see strong growth in Gudang Garam's 'mild' product, bringing higher overall volume growth for the company going forward, but the change in the product mix may lead to lower-than-expected operating profit margin," Nomura said in a note on Monday.
The research house kept its 'buy' rating as it expects margin recovery to drive strong earnings growth in full-year 2013.
"We believe the mild segment will continue to grow within Indonesia's cigarette industry so a stronger foothold in the segment is positive for Gudang Garam."
Shares of Gudang Garam were down 1.39 percent at 49,800 rupiah, while the broader index was down 0.33 percent.
1045 (0345 GMT) (Reporting by Andjarsari Paramaditha; Editing by Subhranshu Sahu)