Cement producers in Indonesia are turning to the lucrative domestic market by reallocating intended sales from export markets as demand rebounded strongly in September to a monthly high, Danareksa Equity Research said.
“The source of the growth was the strong domestic demand which rose 15 percent year-on-year in the nine months to 39.5 million tonnes,” analyst Chandra Pasaribu said in a note on Tuesday.
Pasaribu said demand in the Java market continues to show healthy growth, while demand in other areas has not stopped growing despite weaker commodity prices.
Cement exports might need to be undertaken to balance supply and demand, unless domestic demand growth stays at the current rate, the research house said. At the moment, supply almost matches domestic demand.
Danareksa’s top picks in the sector are PT Semen Gresik with a target price of 15,500 rupiah and PT Indocement Tunggal Prakarsa with a target price of 22,100 rupiah.
The research house said the industry remains strong due to buoyant domestic economic conditions despite the global turmoil, and infrastructure development remains robust.
Semen Gresik shares were up 0.34 percent at 14,700 rupiah, while Indocement shares were up 0.71 percent at 21,300 rupiah. The Jakarta Composite Index was down 0.06 percent.
1440 (0740 GMT) (Reporting by Andjarsari Paramaditha,; Editing by Subhranshu Sahu)