Stock Valuation of Cement Industry in 2019 and 2021 due to COVID-19 using Free Cash Flow to Firm (FCFF) and Relative Valuation (RV)

Sri Rahayu Fitriani () and Brady Rikumahu
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Sri Rahayu Fitriani: School of Economy and Business
Brady Rikumahu: School of Economy and Business

A chapter in Proceedings of the International Conference on Sustainable Collaboration in Business, Technology, Information, and Innovation (SCBTII 2023), 2023, pp 290-303 from Springer

Abstract: Abstract This research aims to predict the intrinsic value and provide investment decision recommendations for company stocks in the cement industry. COVID-19 has slowed down the economy and caused higher volatility compared to the risk and return of IHSG. This research was carried out in 2019, which was the beginning of COVID-19, and in 2021, when there was an improvement in economic growth. It uses data from 2014–2020 to calculate historical performance and estimates of the company’s financial behavior. the analysis using FCFF and Relative Valuation methods with PER and PBV based on optimistic, moderate, and pessimistic scenarios. The results of the FCFF method showed that in 2019, INTP was overvalued in all scenarios, SMCB was undervalued in all scenarios, and SMGR was overvalued in pessimistic scenarios, while the rest were undervalued. In 2021, INTP was overvalued on all scenarios, SMGR and SMCB were overvalued on pessimistic scenarios, and the rest were undervalued. SMGR PER was undervalued in all scenarios. SMGR PBV was overvalued for all scenarios; INTP and SMCB are undervalued for pessimistic scenarios and overvalued for moderate and optimistic scenarios. In 2021, PERs for SMGR and SMCB were undervalued in pessimistic scenarios and overvalued in moderate and optimistic scenarios. INTP was undervalued for pessimistic scenarios, fair-valued for moderate scenarios, and overvalued in optimistic scenarios. Furthermore, the author recommends investing in SMCB and SMGR, as well as selling INTP.

Keywords: Stock Valuation; Intrinsic Value; FCFF; Relative Valuation (RV); Cement Industry (search for similar items in EconPapers)
Date: 2023
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DOI: 10.2991/978-94-6463-292-7_18

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