Siam Cement (SCC): More domestic cement, better margins, Thailand

There is a good chance that domestic cement sales will grow faster than expected. During the first 5 months of this year, domestic cement sales rose 12.7% YoY, beating FY2004 forecast of 9.9% cited above. This coupled with the likelihood that more infrastructure projects are likely to come in 2H04 and going forward, means that it is likely that domestic cement sales will surprise on the upside. Outperform is maintained on SCC with a target price of Bt300 (local).

SCC is expected to benefit from the positive outlook for domestic cements sales in 2004. There are a number of public infrastructure and transportation projects in the pipeline and SCC’s domestic cement sales are forecasted to increase 9.9% to 10Mt this year. Dramatic shift is expected to domestic cement sales, accounting for two-third of total sales in 2004 compared to only a half in 2000. In addition, the company’s shift towards the domestic market should be beneficial as domestic cement prices are Bt1,800 a ton, much higher than the export FOB price of Bt1,066 a ton (US$26/t).