HwangDBS Raises LMC's Earnings Forecast



KUALA LUMPUR: HWANGDBS Vickers Research Sdn Bhd has raised Lafarge Malayan Cement Bhd (LMC)'s earnings forecast for the 2012-2014 financial years by 5-18 per cent, given the cement price hike, softening coal prices and stronger demand.


In a research note, HWANGDBS said the 6.25 per cent cement price hike was positive for LMC as the previous cement price hike in May 2011 did not fully compensate for the increase in energy and fuel costs.


"Competitors will likely follow suit as seen in the past as LMC is the market leader with a 40 per cent market share.


"However, we think competition will remain heated given existing spare capacity and with demand to pick up strongly," it said.


The research house also said the downtrend in Newcastle coal prices would positively benefit the market players.


In forecasting that coal prices were expected to average between US$102 and US$117 per metric tonne, it said:"Every one per cent decrease in coal price would boost 2013 forecast earnings by one per cent."


The company also forecast cement demand growth at five per cent in 2012 and six per cent in 2013-2014.


HWANGDBS Vickers Research has upgraded LMC to a 'hold' with a target price of RM8.65 pegged to 17 times financial year 2013 forecast earnings per share.-- BERNAMA