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Company Update – Lafarge M Cement (REDUCE, maintain) - Strong fundamentals but lofty valuations




Affin Hwang Investment Bank Bhd


18 Apr 2013





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ASP remains under pressure Even six months after Hume’s entry into the cement market, we gather that the average selling price for Ordinary Portland Cement remains under pressure. The volatility in prices has caused demand to be more erratic as customers prefer to keep a lower stock level in anticipation of a down swing in prices. Naturally, should prices fall, demand will pick up on stock piling. We are not overly concern on the current situation as we do not expect this to prolong. Our comfort is underpinned by the expectation that local consumption for cement will continue to hold in the medium- to- long term, supported by the various on-going and planned infrastructure projects. We expect the construction sector to grow by 10% in 2013. Being the largest player in terms of installed capacity, geographical positioning as well as its better product offering, Lafarge has the advantage to ride on the strong demand especially from the huge infrastructure projects. Currently, Lafarge is the sole supplier to three mega projects – KLIA2, Tanjung Bin and Janamanjung power plant.

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