KMI Wire and Cable No Longer a Myth

SUSTAINABLE MARGIN

Of course, we are delighted to see KBLI earning jumped more than 200%, but what we interested is the rise on the gross profit margin and we ask KBLI.

“Do you think this gross margin level would be sustainable ?”

“YES !” said Mr. Asep. He told us that actually KBLI could got about 20% gross margin, its gross margin in 1H 2016 stood at 16%-17%. They could get 20% gross margin if they can reduced unabsorbed cost and medium – high voltage sales rising higher. They also excited with prospect of better property market in 2018 and forward, since copper cable sales would pick up, it will act as double tailwind (combined with PLN 35GW project) for KBLI earnings.

KBLI also said starting this year, the cable procurement system by PLN Distribusi is run centrally and fetches better unit prices compared to the unit prices in the previous two years.

We are getting positive vibe about the company after the meeting finished. We are encouraged to add more exposure to KBLI, but before doing that, it’s better for us to consider KBLI’s competitor too. KBLI and VOKS are the 2 biggest alumunium cable manufacturer in Indonesia. While SCCO (SUCACO, Tbk) is the king of copper cable (copper price is almost threefold than alumunium).

We decided to go a little bit further to Narogong street at Cileungsi to meet PT. VOKSEL ELECTRIC Tbk (VOKS). Let’s go !