MIDF Research raised its FY25 and FY26 core net profit forecast for MCement by 9.4% and 5.3% to RM468.6mil and RM482.7mil, respectively.
PETALING JAYA: Malayan Cement Bhd
(MCement) is expected to see higher demand for its products in the year ahead, underpinned by a pickup in construction projects in the country.
The building materials company will likely register stronger earnings growth in its financial year ending June 30, 2025 (FY25) after closing FY24 on a high note.
MIDF Research, which has raised its target price for MCement to RM6.60 from RM6.03 with a “buy” call, said FY25 demand would continue to be driven by the private sector with industrial projects such as warehouses and data centres.
“MCement is among the main direct beneficiaries of the pickup in the construction sector, which is expected to be driven by a strong pipeline of jobs, both civil and private,” the research house wrote in its report yesterday.
“Apart from the growth in private projects such as data centres, warehouses and semiconductor factories, the expected rollout of civil jobs from the second half of 2024 is expected to drive the demand for cement and ready-mixed concrete,” it added.
MIDF Research raised its FY25 and FY26 core net profit forecast for MCement by 9.4% and 5.3% to RM468.6mil and RM482.7mil, respectively, to reflect the stronger performance and the improving prospects of the construction sector, which should sustain demand in the coming years.
MCement’s net profit jumped more than twofold to RM428.7mil in FY24 from RM159mil in FY23, on higher revenue of RM4.45bil compared with RM3.76bil previously.
Hong Leong Investment Bank (HLIB) Research said MCement is set to register profitability not seen since the 2012 to 2014 period.It reiterated “buy”, with a target price of RM7.43.
“Profitability is expected to sustain in the near term on the back of still favourable coal cost dynamics, while cement average selling prices net rebates remain stable.
“The stock is a proxy to the strengthening ringgit play as key raw materials like coal and gypsum are transacted in US dollar,” HLIB Research said, noting coal alone constitutes a sizeable 40% to 50% of production costs.
“On the demand side, we expect gradual volume increase as healthy contract awards in recent quarters could translate into tangible cement demand,” it added.
Nevertheless, HLIB Research said the view hinges on the timing of critical infrastructure projects like the Penang light rail transitwhile the East Coast Rail Link supply tapers off towards end-2024. Mega project pipeline in Malaysia and Singapore such as the mass rapid transit (MRT) 3, high-speed rail, Changi terminal 5, Tuas Port and Singapore’s MRT should provide demand runway over the longer term.
CGS International (CGSI) Research raised its FY26 earnings per share (EPS) forecast for MCement by 2% to 40 sen, assuming higher ready-mixed concrete revenue and still-stable volume growth.
However, the research house left its FY25 EPS forecast unchanged at 38 sen.
It reiterated “add” on MCement, with a higher target price of RM6.90 compared with RM6.80 previously.
Faster-than-expected rollout of major projects and stronger-than-expected property sales would be rerating catalysts for the company.
Conversely, the downside risks are slowing property demand and delays in the award of key infrastructure projects.
