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On Thursday, JPMorgan analysts downgraded Semen Indonesia Persero Tbk PT (SMGR:IJ) (OTC: PSGTY) stock rating from Overweight to Underweight and significantly reduced the price target to IDR1,800.00 from IDR4,530.00. The stock, currently trading at $3.35, has already declined over 30% in the past six months. The revision follows a notable decline in the company’s quarterly earnings since the second half of 2024, primarily driven by a decrease in bag cement performance. InvestingPro data shows the company maintains a prominent position in the Construction Materials industry, despite recent challenges.
Semen Indonesia, a holding company that operates 17 subsidiaries through a centralized operation scheme, has seen its domestic bag cement market share drop to 46% as of March 2025, compared to over 50% in the past two years. While the company maintains an impressive 33-year streak of dividend payments, its financial health metrics from InvestingPro indicate some concerns, with revenue declining 6.89% in the last twelve months. The analyst pointed out that the bag cement segment is retail-driven and subject to diverse demand dynamics in local regions. Smaller competitors have been able to quickly adapt to these dynamics, often through faster pricing actions, while Semen Indonesia’s approach through regional distributors offers less detailed sales and marketing strategies.
The downgrade reflects concerns that Semen Indonesia’s market share in the bag cement market will continue to diminish, potentially leading to negative operating leverage. JPMorgan has adjusted its earnings projections for 2025 and 2026 downwards by more than 30%, placing them approximately 15% below consensus estimates.
The new price target of IDR1,800.00 is based on a 4x EV/EBITDA valuation, as stated by JPMorgan. This adjustment indicates a more cautious outlook on the company’s financial performance and market position in the upcoming period. The firm’s analysis suggests that the challenges faced by Semen Indonesia in maintaining its market share and adapting to local demand fluctuations are likely to persist, affecting its earnings potential.
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