Malayan Cement Berhad posted a 3.4x growth in its 3QFY23 core net profit of RM62.7m, on the back of a stronger revenue of +24.6%yoy to RM990.7m. In terms of 9MFY23, the group’s core net profit surged +74.8%yoy to RM78.8m, while its revenue grew +44.5%yoy to RM2.75b. The bottom line exceeded both house and street’s expectations, surpassing full-year estimates by 15.7% and 15.8% respectively.
Cement revenue for the quarter grew +26.4% to RM764.7m on the back of higher volume and selling price of domestic cement while its operating profit grew 2.4x to RM139.7m, with a notable margin improvement to 18.3% from 9.6% in the same corresponding quarter last year. The stellar quarterly result was the main driver of the group’s strong 9MFY23 performance, on top of the factor of revenue consolidation of the 10 companies and its subsidiaries that were acquired from YTL Cement Bhd in Sept-21. The consolidation for 9MFY23 was for the full nine months of 274 days as compared to 191 days in the same period of FY22. For the cumulative period, the cement segment generated a +44.4%yoy growth in revenue to RM2.10b and an operating profit of RM224.0m, which was a +35.3%yoy growth. The margin, however, declined from 11.4% to 10.7% on the back of higher coal and electricity prices.
The segment’s revenue grew +18.9%yoy during the quarter to RM226.02m on the back of higher prices of ready-mixed concrete but its operating profit plunged – 81.2%yoy to RM0.7m due to higher production costs. For the 9MFY23, the segment posted a stronger revenue by +44.8%yoy to RM651.3m, with an operating profit of RM20.6m, rebounding from a loss of -RM19.7m during the same period last year.
MIDF is upgrading its FY23E projections for revenue by +7.3% to RM3.65b and core net profit by +92.8% to RM131.3m. The house is also revising the FY24F revenue and core net profit estimates by +6.7% and +30.4% respectively to RM3.83b and RM126.4m. Target price. Hence the TP is upgraded to RM3.74 pegging to a price-to-book ratio of 1.1x based on its two-year mean to the group’s FY24F estimated book value per share (BVPS) of RM3.40
The house expects MCement to continue benefitting from the strong demand for cement in line with the improving
prospects of the construction sector, with expectations of stronger job flows for both civil and private projects, especially
infrastructure plans that have been outlined in Budget 2023. The MRT3 project, which is widely expected to begin
construction next year, will be another boon for cement manufacturers like MCement. Note that MRT3 is currently undergoing
a cost review to bring its price tag down by -10% to RM45b, hence the delay of the tender awards since Dec-22. Meanwhile,
cement margins are also expected to improve, in line with the correction of coal prices. All factors considered, MIDF is
upgrading its recommendation to BUY (previously NEUTRAL) on MCement.
