KUALA LUMPUR (May 3): Malayan Cement Bhd will likely report strong third quarter earnings when the company reports its results by this month-end, as volume and average selling prices stay high, CGS International said.

Volume probably improved sequentially in the January-to-March quarter after rising 20%-25% in the June-to-December period, CGS said in an earnings preview note. The research house told investors to continue buying the stock and that there is now more upside to share prices at RM6.80 versus RM6.00 previously.

By June 30, when its financial year 2024 (FY2024) ends, net profit is expected to more than double to RM419 million from RM180 million in FY2023, according to CGS’ forecast. The forecast puts CGS far ahead of consensus estimates that call for a net profit of RM403 million.

Shares of Malayan Cement have surged 21% so far this year, tracking the strong gains of other building material companies amid investors’ optimism that the government will accelerate the rollout of big ticket projects to spur economic growth.

Analysts have also remained bullish, with all six analysts covering the stock having ‘buy’ recommendations. The consensus 12-month target price is RM5.79, according to Bloomberg.

Further, the cement industry in Malaysia will likely face increased downtime for maintenance over the near term due to its ageing plants, which will reduce effective capacity in the industry and keep average selling prices high, the research house noted.

Malayan Cement is also the sole supplier of cement for the East Coast Railway Link (ECRL) project, where its grinding plant in Port Klang covers the ECRL route, CGS said. Exports, particularly to Singapore, should remain strong in FY2024, it added.

Average cement prices in Malaysia have risen 2.7% year-on-year and 0.2% month-on-month to RM23.01 for every 50kg bag in March after staying unchanged in January and February, according to the Department of Statistics.

Still, CGS expects “the domestic pricing environment to remain stable”, with an average selling price of RM368 a tonne for FY2024.