Malayan Cement Bhd’s (MCement) improving earnings outlook has yet to be reflected in its share price, with CGS International Research describing the stock’s recent weakness as disconnected from stronger profit expectations and positive industry fundamentals.
Following a meeting with the cement producer on July 8, CGS said MCement continues to benefit from steady demand for its core cement products, while its ready-mixed concrete (RMC) and export businesses are emerging as key growth drivers.
The research house noted that Bloomberg consensus earnings-per-share (EPS) forecasts for FY2026 and FY2027 have been upgraded by between 27% and 37% since January this year. However, the company’s share price has fallen about 11% over the past month, leaving the stock trading at just 8.6 times CY2027 forecast earnings, around one standard deviation below its historical average price-to-earnings multiple of 12.5 times.
CGS believes the valuation does not fully reflect MCement’s earnings potential.
The research house expects the group to maintain healthy EBITDA margins of between 30% and 32% from FY2026 to FY2028, supported by stable average selling prices (ASPs) and easing input costs.
Management indicated that cement demand remains resilient, while coal costs are expected to decline alongside moderating oil prices, helping to alleviate cost pressures.
MCement has also continued diversifying its fuel sources by increasing the use of biomass, locally sourced plastics and treated refinery waste. Investments in several plants have enabled the company to utilise lower calorific value coal more efficiently, reducing its exposure to fluctuations in higher-grade coal prices.
According to management, recent changes to Indonesia’s coal export policy, which centralises exports under a single government agency, are not expected to materially affect operations because the company primarily imports lower-calorific coal.
CGS maintained its revenue and earnings projections, forecasting revenue and net profit compound annual growth rates of 8% and 16%, respectively, between FY2025 and FY2028. The projections assume cement sales volumes will grow between 3% and 6%, while cement ASPs are expected to range between RM394 and RM414 per metric tonne.
The research house also expects cement demand to strengthen as major infrastructure projects such as the Penang LRT Mutiara Line, Johor’s Elevated Autonomous Rapid Transit (E-ART) system and several large-scale water infrastructure developments progress into more active construction phases.
Meanwhile, the ready-mixed concrete business is expected to become an increasingly important contributor to group earnings.
CGS said MCement’s customised concrete solutions for data centre construction, particularly products designed for industrialised building systems (IBS), could provide significant growth opportunities as investment in Malaysian data centres continues to expand.
It forecasts RMC revenue to grow between 15% and 26% annually from FY2026 to FY2028, with the segment’s contribution to total group revenue rising from 31% to as much as 43%.
The growth is expected to be supported by demand for the company’s portfolio of 35 specialised concrete products and continued rollout of data centre projects across the country.
Beyond the domestic market, MCement is also seeing stronger export prospects.
Its Langkawi plant has received increasing enquiries from overseas markets, including Singapore, where cement demand is expected to rise as large infrastructure developments such as Changi Airport’s Terminal 5 expansion gather pace.
CGS believes these growth drivers position Malayan Cement well to capitalise on both domestic infrastructure spending and regional construction demand over the coming years.
The share price is trading at 6,26, which is 21% lower than the level held 6 months ago; however, the price has seen some uptick lately.
