Review of PT Intanwijaya International Tbk (IDX: INCI) Performance in Q1 2023

IDX : INCI

IDX:INCI PT Intanwijaya Internasional Tbk

Things I learned from the 2023 Public Expose :

1. The Public Expose was held in Semarang, Central Java.
2. PT Intanwijaya Internasional Tbk ("the Company") is a chemical industry company based in Jakarta. The Company was established under the name PT Intan Wijaya Chemical Industry on November 14, 1981.
3. The list of investor statuses is 98% owned by domestic individuals.
4. The company conducted a review of customer receivables. Is it reflected in the customer receivables period?
5. The company is good at managing, as evidenced by the 0.29% increase in Equity, while short-term liabilities decreased by 27.4%.
6. The income statement is slightly disappointing, with a net profit of only 654 million rupiah compared to 8.234 billion rupiah in Q1 2022. This represents a decrease of 92.02%.
7. Sales from Semarang contributed 73.87%, while sales from Banjarmasin contributed 26.13%.

Things I learned from the Q&A Session

1. The management is more selective in finding healthier customers, leading to a change in the company's market strategy by choosing value-added products (higher quality products with higher prices). As a result, even though the volume may decrease, the profit margin is higher.
2. The increase in interest rates in the United States is becoming higher, resulting in higher mortgage rates. As a result, property developers are facing a slowdown, and this will have an impact on various areas not only in America but also worldwide, including Indonesia. This will affect building materials, including plywood that uses resin, which will have a significant influence.
3. Management believes that the use of building materials will continue to increase, and until today, they are confident that there is no substitute for wood. In construction, it is not feasible to use plastic or iron for everything, and wood will still be used for furniture, panels, and other purposes.
4. The company also needs to be cautious about the current economic situation and adopt a defensive mood, such as choosing the best customers, ensuring timely payments, and maintaining smooth collections. Management should filter out any situations where customers may face difficulties, to avoid getting trapped in challenging circumstances that could impact the company.
5. Management emphasizes that the main focus of PT Intanwijaya Internasional Tbk is to achieve healthy, profitable, and sustainable growth. To attract new customers, there is a need for better research and development. If necessary, the company is open to issuing debt instruments, although as of today, there has been no such issuance.

Things I have learned from the Financial Report 2023-Q1

1. In point 4 of the things I have learned from the Public Expose, the company conducted a review of customer receivables. The Balance Sheet shows an increase in Trade Receivables from third parties as well as from related parties. Based on Financial Note number 6, the aging of trade receivables based on the invoice date is as follows:
     
2. So far, there are many receivables overdue for more than 90 days, amounting to 41.9 billion. Meanwhile, the receivables overdue for 31-90 days have experienced a significant increase from 19.6 billion to 43.2 billion. In my opinion, what the company has conveyed has not been fully reflected in the financial report for 2023-Q1. We need to wait and see what will happen in 2023-Q2 and the subsequent quarters.
3. The accounts payable, in my opinion, are in a very good condition as they are only for 1-3 months, with a total amount of 47.5 billion rupiah.
4. The company has lease liabilities to PT. Tanmizi Utama amounting to 1.8 billion. This account represents the lease of the company's building based on contract No. 031/TU/JKT/XII/21 dated 30 December 2022, which will mature on 31 December 2023.
5. The shareholders are owned by the Tanmizi family.

   

   
   
6. Sales experienced a decline from 136.9 billion to 92.7 billion.

   

   
   
7. Cost of goods sold also aligns with the decrease in sales. The largest purchase from PT Humpuss amounted to 3,696 tons with a percentage of 52.21%
8. Indirect expenses that experienced a decrease were repair and maintenance costs. In 2022-Q1, it amounted to 1.0 billion rupiahs and decreased to 452 million rupiahs.
9. General and administrative expenses improved significantly with the absence of Bad Debt Provision. This is in line with the commitment made during the public expose. In 2022-Q1, the company set aside 2.3 billion rupiahs for Bad Debt Provision.
10. In the other operating expenses, there is a 2.6 billion rupiahs loss due to exchange rate fluctuations. If this expense is considered not present, the net profit of the company would be 3.2 billion rupiahs.

Based on the graph above, it can be concluded that the company's Profit and Loss Statement tends to show an upward trend. The company's Net Profit Margin (NPM) is generally around 2% - 8%, but for 2023-Q1, it experienced a sharp decline with NPM only at 0.71%.

The Balance Sheet shows a decrease in assets, which occurred due to a reduction in liabilities while equity did not decrease significantly. As a result, the Debt Equity Ratio (DER) improved to 14.25%.

In terms of valuation, INCI has a Price-to-Book Value (PBV) of 0.26x and a Price-to-Earnings (PE) ratio of 41x. In my opinion, it is interesting for collection.

Disclaimer On!