Malayan Cement remains a BUY at CIMB Investment Bank Bhd (CIMB Securities) with a target price of RM8.50, despite higher coal price assumptions prompting the research house to cut its FY27 and FY28 core earnings forecasts by 11% and 5% respectively.
CIMB said the stock still offers an attractive risk-reward profile at current levels, with Indonesia’s tighter control over coal exports tilting its view on prices higher.
CIMB said Indonesia’s planned centralisation of commodity export data and the upcoming Strategic Minerals and Commodity Exchange could strengthen its influence over coal pricing. The medium calorific coal reference price also rose to US$96.92 per tonne for the second half of August, although this was partly driven by a temporary increase in global demand.
At the same time, Malayan Cement could benefit from stronger demand from YTL Cement’s downstream businesses. CIMB highlighted Eastern Pretech’s recent contracts to supply precast concrete sleepers for the Klang Valley Double Track and East Coast Rail Link projects, as well as concrete elements for a development in Singapore.
The research house lowered its target price by 6% from RM9.00, based on 16 times CY27 core earnings, after raising its coal price assumption to US$90 per tonne and pushing back its expected domestic cement price revision to FY28.
Despite the earnings cuts, CIMB said Malayan Cement’s valuation remains attractive, trading 0.7 standard deviations below its five-year average P/E, while its pricing power should help it manage input cost volatility.
As of 11.24 am, the stock price slipped 0.47% to RM6.36.
