Shares of Asia Cement Corp (亞泥) have surged nearly 57 percent this year, with investors positive about the industry’s outlook in light of peak-season demand in the second half of the year and rising cement prices amid China’s environmental protection measures and disciplined production by industry peers.
The nation’s No. 2 cement producer on Friday saw its shares close 3.39 percent higher at NT$44.25 in Taipei trading, their highest closing price since August 2011, Taiwan Stock Exchange statistics showed.
“China’s supply-side reforms might catalyze the mid and long-term development of the cement market in China,” Capital Investment Management Corp (群益投顧) said in a research note on Wednesday last week. “Moreover, Asia Cement’s investment in China Shanshui Cement Group Ltd (山水水泥) is expected to benefit its revenue and earnings.”
Asia Cement, which holds a 22.5 percent stake in Shanshui Cement, has established operation bases in China’s Jiangxi, Sichuan and Hubei provinces. Being part of the Far Eastern Group (遠東集團), the company has investments in other affiliates of the conglomerate, including Chiahui Power Corp (嘉惠電力), Yuan Long Stainless Steel Corp (遠龍不銹鋼), U-Ming Marine Transport Corp (裕民航運) and Far Eastern New Century Corp (遠東新世紀), a polyester and textile maker, the company’s Web site showed.
In the first half, Asia Cement’s net profit increased 236.18 percent to NT$6.23 billion (US$202.3 million) from a year earlier, with earnings per share of NT$1.98. The first-half figure, the highest for the period in the company’s history, had already exceeded its full-year profit of NT$5.47 billion last year, or NT$1.74 per share, company data showed.
Gross margin in the first half was 23.92 percent, up from 12.07 percent a year earlier, and operating margin reached 19.8 percent, compared with 8.24 percent the previous year.
From January to last month, consolidated revenue expanded 35.13 percent annually to NT$46.03 billion, company data showed.
In the second half, China’s cement prices are expected to decrease initially amid low-season demand due to high temperatures and rainfall, but prices might regain momentum on peak-season demand afterward, Capital Investment said.
Asia Cement’s business performance is likely to follow the same pattern, Capital Investment said.
The investment consultancy said that Asia Cement’s third-quarter revenue would decline 8 percent quarter-on-quarter and net profit would drop 17.26 percent, but fourth-quarter revenue is predicted to increase 6.63 percent quarterly and net profit to expand by 34.23 percent.
Overall, Asia Cement’s net profit this year is expected to grow 105.63 percent year-on-year to a record NT$11.25 billion, or NT$3.35 per share, on revenue of NT$81.64 billion, up 25.79 percent from last year, Capital Investment said.