PETALING JAYA: Companies in the building materials sector are expected to benefit from stable average selling prices and more manageable costs, leading to margin normalisation, despite delivering mixed earnings results recently.
Kenanga Research said non-ferrous metal counters met its expectations in the second quarter of 2024 (2Q24) reporting season, while ferrous metal companies disappointed due to higher input costs and weaker demand.
Kenanga Research expects metal prices to remain firm amid weak demand visibility. This is balanced by ongoing supply consolidation which should in turn help stabilise steel prices and reduce earnings volatility for steel product manufacturers.
“Aluminium prices have been on an uptrend since the beginning of the year on surprisingly strong consumption in China during the early part of the year, while outside of China, demand was spurred by renewable energy projects and electric vehicle production,” it said.
Locally, it said water pipe makers are set for promising growth with the revival of water infrastructure jobs. The demand for steel should improve with the rollout of mega projects. It maintained an “overweight” call on the sector with top picks including Press Metal
and Engtex with a target price of RM5.80 and 81 sen a share.
