KUALA LUMPUR (Sept 10): It is an opportune time to buy Malayan Cement Bhd (KL:MCEMENT) stock, according to CIMB Securities, citing an unwarranted steep valuation discount, given the group's market dominance and sturdy balance sheet.

The research house has maintained its "buy" call with a target price of RM8.50, which translates to an upside of 55%, based on the current share price of RM5.48.

Malayan Cement is now trading at FY2027-FY2028 price-to-earnings ratio (PE) of only 11-12 times and one time FY2026 price-to-book value (PBV).

"We believe that investor concerns over weather-related disruptions to major coal barging routes in Indonesia, as well as renewed tensions in the Middle East, may have weighed on the stock," it said in a note on Thursday.

However, CIMB believes that the knock-on impact from coal supply dislocations in Indonesia remains manageable for Malayan Cement. 

It noted that the latest Indonesian benchmark prices for low- and medium-grade coal actually softened half-on-half (HOH) by 1.1% and 1.9% respectively in the first half of September 2026. 

Furthermore, any price gains will likely be capped by softer demand from China and India, as these markets diversify sourcing to Russia, South Africa, and Australia, it added.

CIMB estimates that Malayan Cement has locked in coal supplies through November 2026, mitigating risks from weather-induced supply disruptions in Indonesia. 

The current medium-grade coal spot price of US$83/tonne remains below CIMB's US$90/tonne forecast for FY2027-FY2028, providing a margin of safety on cost assumptions. 

The analyst noted that local cement prices are expected to remain stable for the rest of the year, hovering within a narrow band of RM25.30-RM25.95 per bag over the first seven months of 2026. 

This aligns with feedback from construction and property players, who "do not expect any big swings in cement prices for the rest of 2026", provided oil prices remain stable.

Further, CIMB noted that Malayan Cement has kicked off various initiatives to improve operating efficiency and use of alternative fuels and materials to optimise production costs. 

The research firm estimates Malayan Cement's core net profit to rise from RM918 million in the financial year ended June 2026 (FY2026) to RM950 million in FY2028.

The dividend yield is projected to increase from 2.7% in FY2026 to 3.6% in FY2028, while net gearing is forecast to improve from 12.3% in June 2026 to net cash by FY2028, further strengthening the balance sheet.

Consensus ratings show six "buy", one "hold", and nil "reduce" calls, indicating broad analyst support for the stock.