PETALING JAYA: Despite concerns within the cement sector, Hume Cement Industries Bhd
has managed to maintain an above- industry-average margin, backed by a healthy utilisation rate and superior plant efficiency.
UOB Kay Hian (UOBKH) Research said the 72%-owned unit of Hong Leong Group also has good capital potential management, evident by its net cash position.
However, the overall cement sector has seen its stocks sold down as elevated Newcastle coal prices rose 23% year-to-date from a low base in 2025.
Hume’s third quarter of financial year 2026’s (3Q26) core net profit of RM52.5mil brought its nine months profit to RM177.9mil which was 77% of UOBKH Research’s full-year earnings forecasts.
Sales were down 6% due to lower concrete sales after cessation of the concrete segment in Peninsular Malaysia.
According to the research house, the surge in coal prices was mainly driven by liquefied natural gas supply disruptions and broader energy price strength linked to the escalating Middle East tensions.
It was also further boosted by Indonesia’s earlier plan to reduce its 2026 coal production quota to around 600 million tonnes from about 790 million tonnes in 2025.
“However, recent developments suggest Indonesia may soften its production curbs and revise miners’ 2026 Work Plan and Budget quotas upward following Indonesia President Prabowo Subianto’s directive to raise output amid stronger energy prices,” said the research house.
It added the government is still evaluating the implementation of coal export levies and potential windfall taxes to boost fiscal revenue and offset rising energy subsidy burdens.
The easing of production restrictions will likely help alleviate earlier concerns over a severe supply crunch for cement producers reliant on Indonesian coal.
Moreover, enforcement by the Transport Ministry and Road Transport Department on overloaded commercial vehicles led to an increase in cement distribution costs.
“Hume implemented a 13% to 15% price hike in November last year to mitigate cost pressures.
“Despite limited truck availability, Hume still delivered an around 4% quarterly earnings growth in 2Q26 to RM63.8mil, underscoring strong operational execution,” UOBKH Research noted.
It said the injection of additional truck capacity in Sabah and Sarawak is expected to ease logistical bottlenecks – Hume will be able to sustain its average selling prices backed by resilient demand.
Hence, UOBKH maintains a “buy” call on the stock, but with a lower target price of RM3.98 from RM5 – based on a 12 times 2026 price-to-earnings (PE) ratio.
“The lower PE ascribed reflects near-term concerns over rising coal costs, the potential slowdown in construction activities due to surging oil prices from the Middle East conflicts, and less aggressive-than-hoped capital management.”
