Asia Cement Expected to Continue Performance Improvement in 2024 Despite Decreased Shipments

Shinhan Investment Corp highlighted Asia Cement's consistent performance growth in the fourth quarter of last year, aligning with projections. The company saw a 6.4% increase in sales to 314 billion KRW and an 8.2% rise in operating profit to 40.2 billion KRW compared to the same period the previous year. Despite a reduction in domestic cement shipments beginning in the third quarter, the end-of-year cement price increase and the decrease in coal prices contributed to the year-over-year performance improvement.

However, the profitability during the fourth quarter was slightly disappointing compared to the second and third quarters, attributed to a temporary spike in coal prices due to the Israel-Palestine conflict and an increase in electricity costs.

Looking into 2024, despite an expected decrease in shipments due to a significant drop in construction starts in 2023, Asia Cement's performance trend is likely to continue improving. The company anticipates a 5% decrease in domestic cement shipments compared to the previous year. Nonetheless, considering last year's cement price increase (6.9%) and this year's early ready-mix concrete (remicon) price hike (5.6%), the company is expected to maintain a robust sales volume, balancing the decrease in shipments with the price increase effect.

Further, the anticipated continued decline in coal prices and the consequent reduction in electricity costs are expected to sustain profitability improvement. Asia Cement's share price has risen 3.8% since the beginning of the year, following the government's value-up program announcement, outperforming the cement industry's average.

For 2024, Asia Cement is expected to secure a net profit of over 60 billion KRW on a standalone basis, supporting ongoing shareholder return policies. The potential for increased dividend payout ratios and dividends per share (DPS) suggests that the company's current price-to-book ratio (PBR) of 0.41 remains undervalued. This positive outlook on dividend tendencies and the evident shift towards a more shareholder-friendly stance provide a solid basis for expecting a rebound in momentum.

Source

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