(May 21, RM9.50)
Maintain “hold” with a target price of RM10.06: Lafarge Malaysia Bhd’s (Lafarge) annualised first quarter of financial year 2015 (1QFY15) core net profit was 3% above our full-year forecast and 87% of consensus.
This is not surprising given the strong pre-goods and services tax (GST) industry volume which benefited the group’s cement and ready-mix divisions.
While revenue rose 3% year-on-year (y-o-y), the earnings before interest, taxes, depreciation and amortisation (Ebitda) margin slid from 19.7% in 1QFY14 to 19.3% in 1QFY15 due to sustained price volatility, which we suspect impacted the cement segment.
1QFY15’s overall performance was therefore broadly in line, as we expect margins to continue to be under pressure due to higher electricity costs and price competition.
The first interim single-tier dividend per share was in line. Our expectation of 3% to 4% domestic cement demand growth in 2015 (estimated 5% to 6% growth in 2014) still holds.
The demand for cement and other building materials is likely to pick up. Our industry checks indicate that the moderation in launches by some property developers post-GST implementation could be compensated by the revival in demand from the implementation of non-residential jobs from the second half of 2015.
Major large-scale projects that are set to begin implementation in 2016 include the RM25 billion Mass Rapid Transit Line 2, the RM9 billion Light Rail Transit Line 3 and various infrastructure projects.
In the quarters ahead, we expect pricing volatility and cost pressures to persist due to the pre-GST and post-GST demand effect, and higher electricity costs (about 50% of operating costs).
However, mitigating this is Lafarge’s market share dominance, which is likely to stay relatively intact over time. — CIMB Investment Bank Bhd, May 21.
Maintain “hold” with a target price of RM10.06: Lafarge Malaysia Bhd’s (Lafarge) annualised first quarter of financial year 2015 (1QFY15) core net profit was 3% above our full-year forecast and 87% of consensus.
This is not surprising given the strong pre-goods and services tax (GST) industry volume which benefited the group’s cement and ready-mix divisions.
While revenue rose 3% year-on-year (y-o-y), the earnings before interest, taxes, depreciation and amortisation (Ebitda) margin slid from 19.7% in 1QFY14 to 19.3% in 1QFY15 due to sustained price volatility, which we suspect impacted the cement segment.
1QFY15’s overall performance was therefore broadly in line, as we expect margins to continue to be under pressure due to higher electricity costs and price competition.
The first interim single-tier dividend per share was in line. Our expectation of 3% to 4% domestic cement demand growth in 2015 (estimated 5% to 6% growth in 2014) still holds.
The demand for cement and other building materials is likely to pick up. Our industry checks indicate that the moderation in launches by some property developers post-GST implementation could be compensated by the revival in demand from the implementation of non-residential jobs from the second half of 2015.
Major large-scale projects that are set to begin implementation in 2016 include the RM25 billion Mass Rapid Transit Line 2, the RM9 billion Light Rail Transit Line 3 and various infrastructure projects.
In the quarters ahead, we expect pricing volatility and cost pressures to persist due to the pre-GST and post-GST demand effect, and higher electricity costs (about 50% of operating costs).
However, mitigating this is Lafarge’s market share dominance, which is likely to stay relatively intact over time. — CIMB Investment Bank Bhd, May 21.
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