SCCC Spikes 10% on Strong Earnings Outlook, Analyst Recomm. “BUY” at TP of ฿230

The share price of SCCC rose ฿14.00/share or 9.72% to ฿158.00/share with a trading value of 206 million baht. 


KGI Securities maintained a rating of Outperform on Siam City Cement Public Company Limited (SCCC) with a 2021 target price of ฿230.00/share based on long-term PER of 18.5x, believing cost savings initiatives and increased plant efficiency would be the key positive factors to sustain earnings in 2021.


SCCC reported 4Q20 earnings of 932 million baht (+94.5% YoY, +3.8% QoQ). The result was 308.7% far above KGI expected, mainly due to a higher than expected gross margin and lower than expected asset impairment cost. The company also announced 2020 DPS of ฿9.00/share (XD on February 24 and payment on April 5), implying a dividend yield of 6.25%. 


The company reported quarterly sales of 10.4 billion baht (-12.0% YoY, +0.6% QoQ). Gross margin was 35.7%, improving from 32.8% in 3Q20 and 31.6% in 4Q19. The improvement was due to improved plant efficiencies, operating cost reduction and lower coal cost. 


The decline YoY of sales was due to weak demand for ready mixed concrete (RMC) (slowdown in property market) and trading revenue (demand and  price level remained lower than pre COVID-19). Sales were flat QoQ as weak domestic cement demand due to heavy rainfall and flooding was offset by i) increasing demand in overseas markets (Vietnam, Sri Lanka and Bangladesh), ii) slight increase in RMC from low rise residential housing, and iii) improvement in trading activities.


However, KGI saw that SCCC could be at risk from delayed public investment and macroprudential policy in real estate.

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