While mega projects are expected to be a growth driver for cement demand, the 5-8 per cent growth expected for this year has not yet factored in these projects. Domestic cement price should increase, though not significantly in the near term, while margin improvement is expected from lower energy costs, which should be positive to overall profitability (writes KGI Securities). Among cement producers, SCC is preferred, as SCCC, though a pure cement producer, is very expensive, trading at PE of 19.4x. SCC’s valuation is more attractive with promising long-term growth. However, its high exposure to its petrochemical business, which is expected to have overall margin contraction in 2006 due to a downturn in the petrochemical industry, could cause its share price performance to have limited upside and perform in line with SET.
Published under Cement News