November 04, 2024

No Competition, Just Growth

Market Commentary

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In just one day, Trump could very well win again, and if that happens, brace yourself for global waves of change.

Trump has vowed to bring all manufacturing back to the U.S, doubling down on making "America Great Again."

But this means China is in for a rough ride, not just in the American market but also in their trade with other countries, including Indonesia.

He’s proposed a 60% tariff on Chinese imports if he returns to office.

Chinese products that used to flow easily across borders will now face serious barriers in US and its allies due to this new policy.

The result? Products piling up in China, massive oversupply, and eventually, they’re likely to get dumped, sold at low prices in markets that still accept them.

Indonesia is one of the top markets where China might look to “dump” their oversupplied goods.

But there’s one company that won’t feel the impact of this flood of Chinese products, IMPC.

Why? Because IMPC specializes in roofing, a segment that’s immune to China’s oversupply.

IMPC’s roofing products aren’t suited for countries with four seasons, like China, as extreme temperature shifts can cause the materials to shrink or warp.

As a result, there are no major companies in China producing this type of roofing, giving IMPC a unique edge.

Since these products don’t face direct competition from China, they’re able to stay steady.

Just recently, IMPC announced its 3Q24 results, and let’s just say investors are all smiles!

Their revenue skyrocketed, jumping 42.2% qoq and 40.8% yoy, reaching a remarkable IDR 981 bn.

This leap was strongly fueled by their new acquisition, Mulford Holdings, which contributed around IDR 200 bn to IMPC’s revenue.

Even more exciting, IMPC’s 9M24 profit stayed right on target, hitting IDR 397 bn, up 16.7% yoy

This acquisition has definitely been a major boost, but here’s what’s impressive: even without Mulford, their revenue and profit still grew organically by 6% and 12%.

This means IMPC isn’t just relying on acquisitions to grow, they’re also keeping their core performance rock-solid.

With unique products not made in China, IMPC holds a distinct advantage.

So, even as cheaper Chinese products flood the market, IMPC doesn’t need to worry about direct competition since they play in a more specific segment.

IMPC is expected to deliver strong results in 4Q24, aiming for a full year profit of IDR 555 bn, in line with their usual seasonal trends.

We’ve adjusted our profit forecast for 2025-2026 to IDR 614 bn (+10.8% yoy) and IDR 721 bn (+17% yoy).

This adjustment is due to a slightly lower margin outlook from consolidating Mulford.

However, this impact on margins is likely temporary, as the management’s vertical integration strategy between IMPC and Mulford Holdings is expected to boost margins over the next 12-18 months.

Our analysts maintain a BUY recommendation for IMPC and have raised our target price to IDR 430/share, shifting the valuation focus to 2025.

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