Semen Gresik (SMGR) is in the right track

In the 1Q 2009 Semen Gresik (SMGR) shows a good performance. It has increased its net income to Rp 681 Billion, or 31.3% increased year on year. Even though it could not maintain its sales due to the though economic condition (-2.1% year on year), SMGR still capable to reduce its production cost. Its EPS for the 1Q 2009 has increased 33.3% to 116 compare to 87 in 1Q 2008. Here is the data:

(Bio Rupiah)	1Q-2008	1Q-2009	Change (%)
Revenue	2558	3228	26.19%
Cost of Revenue	1472	1850	25.68%
Gross Profit	1086	1378	26.89%
Operating Expense	382	512	34.03%
Operating Income	704	866	23.01%
EBITDA	881	974	10.56%
Net Income	519	681	31.21%
EPS	87	116	33.33%

	1Q-2008	1Q-2009
ROE	7.30%	7.80%
ROA	5.70%	6%
Debt to Equity	3.0	2.1

If we assumed that SMGR could maintain its EPS growth around 20-35% hence the full year Forecasted EPS would be:

Forecasted EPS

EPS 2008	20% Growth	35% Growth
	FY EPS 2009	FY EPS 2009
426	511.2	575.1

I would show you a scenario analysis with different PE ratio.

Scenario Analysis

	20% Growth	35% Growth
PE 8x	4089.6	4600.8
PE 10x	5112	5751
PE 12x	6134.4	6901.2

Based on this analysis with the price of SMGR closed at 4100 today (30 April 2009), I would recommend a “BUY” for SMGR.