Cahya Mata's new clinker line to meet expected rise in cement demand


KUALA LUMPUR: Cahya Mata Sarawak Bhd's prospects are expected to improve as it expands its clinker production capacity with the construction of a new production line at its integrated complex in Mambon, Kuching.

According to MIDF Research, the increased production could be a ramping up of cement production to meet an expected rise in demand for cement in Sarawak and new markets, especially Nusantara.

The research firm cited a Bandung Institute of Technology projection that the construction of Nustantara as Indonesia's new capital will grow demand to 21 million tonnes per annum over the next 20 years.

MIDF added that Cahya Mata has a long-term goal to reduce its reliance on imported clinker, which will enable it to better manage its operating costs and improve margins.

"We estimate that this will enable CMSB to triple its yearly clinker production capacity from 900,000 metric tonnes currently to a total of 2.8 million metric tonnes," it said.

The research firm said clinker is the main raw material for the manufacturing of cement, and comprises 60% to 90% of cement produced depending on type.

"During our trip to Sarawak recently where we visited the integrated plant in Mambong, management guided that the ratio of its clinker usage was roughly 40% self-produced and 60% imported, usually from Vietnam," said MIDF.

It added that Cahya Mata's cement plants have a capacity to produce 2.75 million tonnes of cement annually, and has a plant utilisation of only about 54.5%.

It said this was sufficient to meet Sarawak's demand of 1.5 to 1.6 million tonnes annually.

MIDF said it remains positive Cahya Mata's earnings outlook in FY23, and is optimistic on its medium- to long-term prospects, especially with the development projects that have been planned for the state and Indonesia's upcoming new capital.

It reiterated "buy" on the stock with an unchanged target price of RM1.50.

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