|The Jakarta Post (20/07)|
With second quarter 2012 (2Q12) result season upon us, we provide investors with a preview of market performance and reviews of sectors and stocks under our coverage (75 companies, equivalent to 80 percent of total market cap of the index).
For the market as a whole, we expect 2Q12 year-on-year (y-y) operating profit growth to decelerate from 20.1% in 2Q11 to 15.0% (exhibit 1), but up when compared to 1Q12 level of 10.0% y-y growth.
On the bottom line, market growth also decelerated from 26.5% y-y in 2Q11 to 15.5%, but higher than 1Q12 level of 15.6%. In terms of aggregate 1H12 figures, the market’s operating profit growth reached 12.5% y-y (1H11: 23.7%) with net profit growth of 12.4% (1H11: 29.5%).
We expect 6 sectors (exhibit 2), “the good”, to register higher growth than the overall market performance. The oil & gas sector continues to be skewed towards PGAS’ performance, which we expect to book strong operating and net profit growth due to delay in upstream price increases coupled with low base in 2011.
On poultry, the sector benefits from higher DOC prices which jumped 70% y-y on higher demand. On cement, the sector gains from strong domestic volume growth supported by the buoyant property market.
On the auto/heavy equipment sector, we expect car distributors to accelerate unit sales ahead of the planned increased down-payment policy (4W: 30% banks, 25% multi-finance; motorcycles: 25% banks, 20% multi-finance), while heavy equipment companies should book higher earnings growth on improved weather condition.
In the “bad” category, only one sector falls under this category, having registered mixed performances relative to the market’s y-y growth (exhibit 3). This is mainly pulled down by Jasa Marga’s (JSMR) stable business model and Sarana Menara Nusantara’s (TOWR) lack of increased co-location.
In this “ugly” category, there are 5 sectors (exhibit 4), displaying lower than market performances both at the operating and net profit growth levels. On the consumer front, the sector is mainly dragged down by the single-digit growth of Unilever’s (UNVR) and Gudang Garam’s, which are challenged by margin pressures stemming from higher 1Q12 commodity prices, used in 2Q12 production. On telcos, we expect earnings growth to be capped by continued intense competition.
Finally, for the dollar earners (i.e. plantations and metals), performances are adversely impacted by lower y-y commodity prices. On coal, moderately higher price increases are not able to offset higher costs such as Strip Ratio, which has the tendency to be sticky.