Maybank Kim Eng (Maybank) has given a “BUY” recommendation on The Siam Cement Public Company Limited (SCC) with a target price of ฿430.00/share on a forward P/E +0.5SD = 13.9x.
SCC reported a net profit of THB8.047b (-17% QoQ, +13% YoY) for 4Q20, below Maybank forecast of THB9b. If added back provisions for impairment, normalised profit would be THB9.614b, beating forecast. At an analyst meeting yesterday, management guided with a conservative view. Maybank maintained its 2021 profit forecast to grow 8.6% to THB37.075b.
In the next 2-3 years, SCC will enter a growth phase, driven by all three businesses. The petrochemical business will see production capacity increase by 70%, focusing on HVA and innovation. The cement and building materials business, focusing on services and solutions to retail, and the integrated packaging business, aiming to grow to double in the next 5 years. The 2H20 dividend is THB8.5, totaling THB14 for full year, or a yield of 3.7%.
NP of THB8b, normalised profit beats at THB9.6b
SCC posted a 4Q20 earnings of THB8.047b (-17% QoQ, +13% YoY), lower than Maybank expectation of THB9b due to provisions for asset impairment, mostly in Myanmar and Indonesia, totaling THB1.567b. If added back to this item, normalised profit would be THB9.614b, beat forecast. For 2020, profit expanded to THB34.144b (+7% YoY) with profit growth in all three businesses despite facing negative factors due to the Covid-19 epidemic.
Outstanding petrochemical despite shutdown
Petrochemical business posted an outstanding profit of THB5.837b (+6% QoQ, +108% YoY) because of the higher petrochemical spreads, namely HDPE-Naphtha = USD592 /tonne (+13% QoQ, +97% YoY), PP-Naphtha = USD736 / tonne (+27% QoQ, +43% YoY).
There was no significant drop in sales volume, at 384,000 tonnes (-13% QoQ, -16% YoY) or just a drop of 66,000 tonnes vs the management guidelines that it will be reduced by 120,000-130,000 tonnes despite a 38-day shut down for maintenance of the MOC plant, earlier plan is 45 days.
The profit share from petrochemical investment is improved to THB2.23b (+36% QoQ, +24% YoY).
CBM turns loss while packaging continues growing
Cement-Building Materials (CBM) business turned to a loss of THB194m due to provision for impairment of assets in Myanmar and Indonesia of THB1.316b. If added back, normalised profit fell to THB1.122b (-41% QoQ, -14% YoY).
This was due to a contraction in demand for cement-building materials, both in the country and abroad. The packaging business enjoyed consistent growth of THB1.486b (+11% QoQ, +24% YoY) driven by both domestic and international expansion and integrated packaging solution strategy and value chain integration.