PETALING JAYA: Malayan Cement Bhd
(MCement) is expected to remain on a strong earnings trajectory despite near-term cost pressure from rising coal prices, according to Affin Hwang Investment Bank Research.
It has maintained its “buy” call on the stock after concluding that the recent sell-down has been excessive.
The research house said the group’s sharp one-day 18% share price correction has opened a fresh entry point for longer-term investors, even after lowering its target price to RM7.50 from RM10.30.
Affin Hwang said valuations remain attractive, noting that MCement is trading at a forward price-earnings ratio of about nine times, which it described as undemanding, given the company’s earnings resilience and pricing strength in the cement sector.
It highlighted that the market reaction appears disproportionate to the actual earnings impact from higher fuel costs.
The key concern stems from coal, a major input cost for cement production, as Indonesian coal prices have climbed about 20% year-to-date from an exceptionally low 2025 base amid supply disruptions linked to the Middle East conflict and tighter production controls in Indonesia.
The research house estimated that every 10% in coal prices would lower MCement’s net profit by 4%, but expects the pressure to moderate after mid-year, although at a structurally higher price base than last year.
Indonesia’s plan to cut its 2026 coal production quota to 600 million tonnes from 790 million tonnes in 2025, together with discussions on a possible 5% export levy, has added to concerns over fuel cost inflation.
Still, Affin Hwang believes MCement is cushioned in the immediate term by existing coal inventories and a firmer ringgit, which should support margins in the second half of financial year 2026 (FY26).
It expects the company to continue posting earnings near historical highs, with FY26 net profit projected at RM859.3mil compared with RM631.9mil in FY25.
Revenue is forecast to rise to RM4.85bil from RM4.45bil previously, while earnings per share is expected to improve to 65.6 sen.
