23-05-2025
Malayan Cement's Outlook Mirrors Sectors' Robust Performance
Malayan Cement Bhd remains a top pick among analysts with unanimous BUY calls from RHB Investment Bank Bhd (RHB Research), MIDF Amanah Investment Bank Bhd (MIDF Research), CIMB Investment Bank Bhd (CIMB Securities) and Hong Leong Investment Bank Bhd (HLIB), each highlighting strong earnings performance and robust outlook amid a recovering construction sector. Target prices range from RM6.35 to RM7.49, signalling potential upside from the current RM4.85 market price.
RHB Research maintained its BUY rating with a target price of RM6.71, citing 3QFY25 core earnings of RM183 million that surpassed expectations by 86-93%. The bank highlighted improved operational efficiencies, lower production costs and higher average selling prices (ASPs) in ready-mixed concrete as key profit drivers despite a slight dip in cement volume.
The house noted that the company's net margin improved to 16.7% from 13.9% in the prior quarter and expects margins to remain strong with stable ASPs and easing coal prices. RHB raised its earnings forecasts for FY25-27 by over 12%, while trimming the target price earnings ratio to 14x to reflect a more moderate growth outlook. The bank flagged risks such as raw material cost inflation and a broader economic slowdown.
MIDF Research also reiterated the call, boosted by an upward revision of FY26 earnings per share to 31.2 sen, pegged to a three-year mean price-earnings ratio of 24x. MIDF Research highlighted a strong 9MFY25 core net profit growth of 32.5% year-on-year, supported by gains in the concrete business and a healthy pipeline of civil and private sector projects including warehouses, data centres and the Johor-Singapore Special Economic Zone (SEZ). The bank pointed to the 3QFY25 operating profit surge in the aggregates and concrete segment, driven by a 20% increase in ready-mixed concrete sales volume primarily from industrial and commercial demand.
CIMB Securities upgraded its target price slightly to RM6.35 following a 9MFY25 core profit of RM478 million that exceeded prior forecasts by 25%. The bank emphasised strong growth in the ready-mixed concrete division, which saw a 4.3 times increase in EBIT margins alongside 28% revenue growth.
CIMB Securities noted that lower depreciation charges and finance costs also supported results. The house views Malayan Cement as well-positioned to benefit from upcoming infrastructure projects such as the Penang Light Rail Transit and Johor Automated Rapid Transit, particularly if parent company YTL Corp wins major tenders. The group's healthy net gearing of 31% and strong operating cash flows were cited as further strengths.
HLIB retained its recommendation, highlighting 9MFY25 core PATAMI of RM490.3 million, surpassing both their and consensus full-year forecasts. The bank attributed earnings growth to operational efficiencies, stable ASPs and demand from high-grade ready-mixed concrete products used in data centres and industrial buildings.
The research house pointed to sustained demand from key projects including the Johor Bahru-Singapore SEZ and Penang LRT, alongside cost discipline and lower borrowing costs as key positives. Despite a modest 5% quarter-on-quarter revenue decline, improved margins and reduced depreciation charges drove a 10.6% rise in core quarterly profit. HLIB projects a dividend yield of 4.0% and total expected return exceeding 57%.
Across the board, analysts agree Malayan Cement is benefitting from a structural shift in the construction sector, with a rising contribution from ready-mixed concrete, operational cost improvements and a healthy project pipeline underpinning robust profit growth. While challenges from raw material inflation and economic uncertainties remain, the company's dominant market position and strategic initiatives support an optimistic medium-term outlook. Related
