PETALING JAYA: The planned increase in domestic electricity tariffs this July may have a knock-on impact on domestic construction margins in the near term, says CIMB Research.
“While a 25% hike in US steel and aluminium imports is unlikely to trigger significant price changes in local building materials, the planned rise in electricity tariffs may still pressure construction margins in the near term.
“This is because the cost of key building materials such as rebars, wire rods and aluminium extrusion products, is expected to spike in the second half of this year (2H25). “Over the medium-to-longer term, we expect the local construction supply chain to pass on the additional input costs via repricing their contracts,” the research house said.
CIMB Research attributed the construction sector’s earnings slowdown primarily to delays in major infrastructure projects in 2H24, as project billings decelerated.
On a positive note, the research house said tender activities and order flows have improved since early 2025, driven by the Penang Light Rail Transit (LRT) and more recently, LRT 3 phase two.
These developments should support a stronger earnings cycle for financial year 2025 (FY25) and FY26, respectively.
CIMB Research said it maintained its “overweight” stance on the construction sector. Gamuda Bhd
and IJM Corp Bhd continue to be our top large-cap picks, with Malaysian Resources Corp Bhd as its top alpha play.
Key rerating catalysts for the sector include stronger order flows, while key risks are higher input costs and labour shortages.
