Domestic cement demand growth grew c12% y-o-y in September: Including the4% y-o-y growth in exports, total cement sales grew by 11.7% y-o-y, indicatingdemand growth has gained momentum since the start of 2Q17. Volumes have grown9% y-o-y (11% y-o-y including exports) during the past six months. However, SemenIndonesia, our only Buy-rated stock in the sector, reported volume growth of 6%y-o-y, which underperformed the market last month. Indocement’s volumes, on theother hand, grew 12% y-o-y as Western Java staged a strong recovery. So far INTP’sexposure to this market and greater competition has impeded its volume growth.。    We remain optimistic about cement demand growth in Indonesia: We identifiedIndonesia as the cement market with the brightest prospects in ASEAN in our recentsector report (see …all fall down…except one published on 17August, 2017).。    A recovery in the country’s trade balance has typically preceded previous recoveriesin cement demand and the former continues to indicate brighter prospects ahead.In addition, benchmark interest rates have been cut to their lowest ever and propertyvolumes in the country have been contracting for almost four years; thus both thepent-up demand and the trigger to stimulate it are present: our Indonesian demandgrowth forecast for 2H17-2018remains around c9%y-o-y.。    Likely rapid recovery in utilisation and margins ahead; we rate SMGR Buy: Withcement ASP slipping below USD60/MT in 2Q17, the profitability of most players otherthan the Top-2has deteriorated to a level where we believe prices and margins areat a bottom and can only go up. With no incremental supply coming into the marketover the next three years, a rapid recovery in utilisation, ASP and margins is likely.Against this backdrop, relatively inexpensive valuations make SMGR a compellingBuy, in our view.。

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