KUALA LUMPUR (Oct 10): RHB Investment Bank Research reiterated its “overweight” stance on the basic materials sector and said it remains confident on the cement industry, given the inherent synergies with the construction and property sectors.
In a sector update on Tuesday, the research house reiterated its conviction that cement demand will continue to flourish in the medium-to-long term, propelled by the commencement of major infrastructure projects in Malaysia.
The research house named Press Metal Aluminium Holdings Bhd and Lafarge Malayan Cement Bhd as its top picks.
RHB IB posited its optimism on the current low inventory levels, “green push” towards solar panels and electric vehicles (EVs), and demand recovery supported by the anticipated upturn in China’s manufacturing and property activities in 2H24.
The research house said the sector is expected to flourish in the medium-to-long term, given the commencement of major infrastructure projects in Malaysia.
It said among the cement makers, Lafarge Malayan Cement Bhd performed extraordinarily with its dominant market position, pricing power, and direct advantages tied to the revival of local construction and property activities.
The research house said that the low inventory level is signaling improving demand, which is one of the reasons that they oversee the sector optimistically.
It said despite the higher production in China, there has not been a noticeable accumulation of aluminium inventories on the Shanghai Futures Exchange, and exchange stocks have remained consistently low.
It said in July, China’s aluminium imports jumped 20% year-on-year (y-o-y) due to low stocks and anticipated higher demand, especially from the EV industry.
RHB IB said in Malaysia, bulk cement prices continue to stay high at this moment, showing a y-o-y increase of 24.7% as of August, with the cost reaching RM380 per tonne.
“Meanwhile, the year-to-date average selling price is hovering at approximately RM380 per tonne. The three-year average for bulk cement prices from 2019 to 2021 was around RM216.80 per tonne.
“Key sector downside risks include a decline in LME aluminium prices, deceleration of global economic growth, higher-than-expected raw material costs, lower-than-expected cement average selling prices, and lower-than-expected cement production,” it said.
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Source: EdgeProp.my
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