Lower-than-expected 3Q23 results. INTP posted revenue of IDR 5.0tn in 3Q23 (+33.1% QoQ, +4.4% YoY) with a cumulative 9M23 figure of IDR 12.9tn (+10.9% YoY), in line with ours (SSI: 75.7%) and cons (73.4% ). The revenue growth in 3Q23 was mainly driven by sales volume growth (due to the low-base effect in 2Q23 from the Eid holiday) to 5.0 million tons (+39.5% QoQ, +13.3% YoY), which helped offset the slight decline in ASP to IDR 902k/ton ( -4.0% QoQ, -7.3% YoY). However, INTP's GPM fell to 33.4% in 3Q23 (vs. 3Q22: 35.2%), mainly due to the increase in contribution from the company’s 2^nd tier product amidst tight competition in the Java market (the Java market has lots of cheaper options for consumers, making it difficult for INTP’s 1^st tier products to compete). On its bottom line, INTP booked a net profit of IDR 569 billion in 3Q23 (+73.9% QoQ, -13.2% YoY) with a cumulative 9M23 net profit of IDR 1.3tn (+33.8% YoY), below ours (68.2%) and cons (6.2%).

Acquisition of Semen Grobogan. INTP has just signed a deal to acquire 100% of Semen Grobogan for IDR 3.9tn, less than 20% of INTP's equity (1H23: IDR 19.7tn). Semen Grobogan has an annual production capacity of 1.8 million tons of clinker and 2.5 million tons of cement, which is expected to be consolidated into INTP’s production capacity in 1Q24, bringing INTP’s total production capacity to 28 million tons. Semen Grobogan’s products are sold mainly in Central Java with an ASP of ~IDR 65k/50 kg, with Semen Gresik (SMGR) as its main competitor. In our opinion, it will be difficult for Semen Grobogan to gain more market share in Central Java, considering that Semen Gresik is already the market leader there. However, on the other hand, this acquisition consolidates two cement players in Indonesia, making the competition less tight and reducing the possibility of price war and fluctuations (over the last 6 months, the price of bagged cement was quite flat). With this acquisition, we project INTP's sales volume to reach 18.4 million tons (+3.3% YoY) in FY24F, with an additional market share of +2-3%.

FY23F and FY24F projections. Even though domestic cement consumption dropped -0.6% YoY in 9M23, we are optimistic that the full-year figure will experience positive growth in FY23F (0-+1% YoY) and FY24F (+1-2% YoY), supported by infrastructure development and the recovery in demand from the property sector. Therefore, we project INTP's revenue to grow +4.8% YoY/+6.8% YoY in FY23F/24F. Regarding its net profit, we forecast a slight decline in FY23F (-3.5% YoY) before a rebound in FY24F (+8.3% YoY).

BUY TP IDR 12,625 (20.5x FY24F P/E). Considering its 9M23 performance and acquisition of Semen Grobogan, we reiterate our BUY rating on INTP with a TP of IDR 12,625 (20.5x FY24F P/E). Risk: 1) Lower-than-expected demand for cement, 2) higher-than-expected coal prices and logistic costs.