Political uncertainty ahead of the July 3 election has been a key factor behind the recent decline in Siam Cement Co’s share price. However, TISCO Securities regard the pullback as an opportunity to Buy given its robust earnings growth in 2011-13F. Even though 2Q11F results should fall QoQ due to seasonal factors, earnings will improve in 2H11. Meanwhile growth momentum should gain pace in 2012F from better petrochem spreads and increasing contributions from HVA products.
A positive view is maintained on SCC’s growth prospects as external demand remains strong and the impact from supply disruptions from the Japan earthquake should be short-lived. Also, SCC will benefit from strong consumer spending and greater investment in infrastructure projects no matter which political party emerges as triumphant in next month’s election.
SCC’s 2Q11F profit is likely to fall QoQ due to low seasonal demand for cement, petrochemical and building products that should result in lower margins QoQ. Paper margins should also soften QoQ due to rising raw material prices and stiffer competition. However, this factor should be partly offset by the start-up of SCC’s special elastomer capacity in April and dividends received from its investments.