SCCC: Price hikes to drive earnings growth

SCCC: Price hikes to drive earnings growth
Published: 24 September 2010

SCCC confirmed during TISCO Securities’ latest visit that it had raised domestic cement prices by Bt400/tonne via two rebate reductions for dealers in Aug-Sept in some products. The net effective price increase is Bt200/tonne and this, coupled with cement demand growth, should help boost earnings in 2011-12F. Hence, rating was upgraded to Buy, with a new TP of Bt265.

Another price hike is expected in 2011 based on our assumption that SCCC’s costs will rise by 19% next year to US$80/tonne. Also there will be cost savings from the start-up of its 7MW waste heat generator early next year. This should help the company’s gross margin to expand from 43.6% this year to 44.2% in 2011F.

Cement demand growth should continue in 2H10F (albeit at a lower pace YoY due to the high base effect) and 2011F driven by public projects (from the construction of several mass transit projects and increased investment budget) and new residential property projects.

Source: TISCO Securities