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Malayan Cement faces cost pressure from rising coal prices, but outlook remains positive: CIMB Securities
🇲🇾 Malaysia /Economy & Trade

Malayan Cement faces cost pressure from rising coal prices, but outlook remains positive: CIMB Securities

From Utusan Malaysia · () Malay

Translated from Malay, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Malayan Cement Bhd. faces cost pressures due to rising coal prices, but its outlook remains positive driven by strong orders from YTL Cement's downstream unit, according to CIMB Securities.
  • CIMB Securities lowered its core profit forecasts for Malayan Cement for fiscal years 2027 and 2028 due to higher coal price assumptions and currency projections.
  • Despite cost challenges, CIMB Securities maintained a 'buy' recommendation, citing the group's pricing power and alternative demand channels from YTL Cement's projects in Malaysia and Singapore.

Malayan Cement Bhd. is expected to grapple with increased costs stemming from a surge in coal prices. However, the company's prospects are viewed favorably by CIMB Securities, largely due to robust order flows from the downstream unit of YTL Cement.

We raised our assumption for coal prices to US$90 (RM364.49) per tonne, and postponed our expected domestic cement price revision to fiscal year 2028.

— CIMB SecuritiesCIMB Securities explained its revised profit forecasts for Malayan Cement.

CIMB Securities has revised its core profit projections for Malayan Cement, reducing them by 11% for fiscal year 2027 and 5% for fiscal year 2028. These adjustments are based on higher assumptions for coal prices and updated forecasts for the Malaysian ringgit against the US dollar. The research firm has raised its coal price assumption to US$90 per ton and postponed its expected domestic cement price revision to fiscal year 2028.

However, we maintain our 'buy' recommendation with a target price (TP) of RM8.50, reflecting the group's pricing power in the face of input cost fluctuations.

— CIMB SecuritiesCIMB Securities reiterated its positive outlook on Malayan Cement despite cost pressures.

Despite these cost pressures, CIMB Securities maintains a 'buy' rating with a target price of RM8.50. This valuation reflects the group's capacity to set prices even amidst fluctuating input costs. The firm highlighted that Indonesia's efforts to streamline commodity export governance will continue to influence coal prices. Indonesia plans to launch a Strategic Minerals and Commodity Exchange in January 2027 to establish domestic reference prices for key export commodities.

Indonesia is expected to continue playing a significant role in the direction of coal prices following its efforts to streamline commodity export governance.

— CIMB SecuritiesCIMB Securities commented on the factors influencing coal prices.

Furthermore, orders from YTL Cement's downstream unit, Eastern Pretech, offer a vital alternative demand channel for Malayan Cement's cement and concrete products. Eastern Pretech secured contracts for precast concrete sleepers for the Klang Valley Double Track and East Coast Rail Link projects in Malaysia, as well as for a development in Singapore. These projects are expected to positively impact Malayan Cement by opening new demand avenues for its ready-mix cement and concrete business in Malaysia.

The development has a positive impact on Malayan Cement as these projects open new demand channels for the group's ready-mix cement and concrete business in Malaysia.

— CIMB SecuritiesCIMB Securities highlighted the benefits of new contracts for Malayan Cement.
DistantNews Editorial

Originally published by Utusan Malaysia in Malay. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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