PT Gajah Tunggal Tbk (GJTL), Indonesia's largest tire manufacturer, indicates to post a 25% growth in sales during the first half this year (1H 2010) as a result of soaring tire sales volume.
In an equity research published by PT Danareksa Sekuritas today, the increase of bias tire was mainly because the closure of tire plants of Gajah Tunggal's contender due inefficiency problem. But, a wider market of bias tire will be restricted by Gajah Tunggal's productiob capacity.
"We keep maintaining a 18% growth target of sales this year, a slightly lower from Gajah Tunggal forecast of 20%-25%," the research said.
Gross margin is estimated to fall by 18% in the second quarter this year on the back of higher rubber price. The company has only raw material inventory for 1-2 months.
Danareksa maintains a buy recommendation for Gajah Tunggal with target price at Rp1,380 per share, implying FY10-11 PER of 8.2x-6.8x.
Disclosure: No position at the stock mentioned above.
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