Malayan Cement 2Q net profit jumps 8 fold, stock upgraded to ‘Buy’

MALAYAN Cement Bhd’s net profit for the second quarter ended Dec 31, 2023 (2Q24) rose more than eightfold to RM121.2 million on the back of RM1.158 billion in revenue.

The YTL Cement Bhd controlled company said in an exchange filing yesterday the better results came from increased volume and stabilisation in selling price for both domestic and ready-mixed concrete.

In a research note today, Affin Hwang Investment Bank Bhd (AHIB) has upgraded the stock to a ‘Buy’ with a 52-week target price of RM5.70 from its previous target of RM4.20.

“We turn optimistic on the stock due to the sector’s pricing power, a much more favourable cost environment, and a potential improved sales volume trajectory,” it said.

The counter ended yesterday’s trade at RM4.82. Its 52-week high was RM4.99 and 52-week low at RM2.18.

AHIB said Malayan Cement’s results were well above expectations due to a much stronger-than-anticipated margin spread.

“We gather from construction players that the average selling price for bulk cement in the reported quarter was sustained at RM380/mt,” it said.

It added that the Indonesian coal benchmark price fell 12% qoq to US$117/mt in the quarter under review, adding that it estimated the cement sales volume for the quarter to have remained flattish qoq around 2.3 million tonnes.

“We revise our earnings for FY24E-FY26E upwards by over 30% to reflect the cement industry’s ability to maintain prices at current levels coupled with subdued coal prices. Management indicated that the upcoming quarters should see similar operational strength, barring any unforeseen spikes in coal prices.

“In fact, coal prices have already dipped slightly in Jan-Feb. Looking beyond 2024, we should see some improvements in cement sales volume should demand from major infrastructure projects kick in alongside potential export opportunities to Sarawak,” it said. – TMR