Credit Suisse keeps Asia Cement at Outperform and retains its NT$48.40 (US$1.6) target price. The house says it expects a 60% profit growth in the company’s China operation in 2Q as it plans to expand its total capacity in China and Taiwan to 50Mt in 2015 from the current 27Mt.
The company is in talks to purchase four additional kilns in Hebei with a capacity of 10Mta and it also aims to build its fifth and sixth kiln in Jiangxi by the end of 2012 and 2013, respectively on local government support. According to Credit Suisse, the Jiangxi plant has "unmatched location advantage with harbours and ports, allowing for cost-efficient water transport to support the end-market in Yangtze River Area."
The house says despite China’s possible growth deceleration, it remains confident in Asia Cement’s China operation based on its disciplined supply and not strong demand.