Shares of Taiwan Cement Corp (台泥), one of the nation’s leading cement suppliers, appeared resilient against a decline on the broader market yesterday after the company announced that it is raising its prices in China’s Guangdong Province on the back of rising demand, dealers said.
The current buying also reflected optimism toward Taiwan Cement’s earnings for the second half of this year, a peak season for the cement industry in China, which is gearing up for various economy-boosting infrastructure projects in the world’s second-largest economy, the dealers said.
The stock price of Taiwan Cement rallied 1.06 percent to close at NT$47.5 yesterday. The TAIEX declined 0.37 percent.
“The price hike news helped Taiwan Cement fend off downward pressure suffered by the broader market at a time when the bellwether electronics sector was trending lower,” Hua Nan Securities (華南永昌證券) analyst Henry Miao (苗台生) said.
“Investors who have ample funds on hand tended to target stocks, like Taiwan Cement, which have come up with positive leads,” Miao said.
In a statement released a day earlier, Taiwan Cement said that it has decided to raise product prices in Guangdong by 10 Chinese yuan (US$1.63) per tonne, or 3.2 percent. With the price hike, the price of Taiwan Cement’s high-end product has reached 320 yuan per tonne.
The price hike is also effective in Guangxi Province. Guangdong and Guangxi account for almost half of Taiwan Cement’s total production capacity in China.
Taiwan Cement said that as the China market has entered a peak season, cement inventories in Guangdong’s Pearl River Delta have been on the decline, paving the way for the rising product prices.
The company said it would keep a close eye on whether and how the market would accept the price hike and does not rule out the possibility of raising prices again next month.
“Taiwan Cement has been dubbed one of the most prominent China concept stocks in the local market. Many investors have high hopes that its earnings will be strengthened due to its large operations on the mainland,” Miao said.
In addition to Guangdong and Guangxi, Taiwan Cement has production bases in several other Chinese provinces, including Jiangsu, Anhui, Fujian, Yunnan, Sichuan and Guizhou. In the first half of this year, Taiwan Cement sold 22.7 million tonnes of cement in China, while selling just 3.1 million tonnes in Taiwan.
“China is a major market for Taiwan Cement and that’s why its bottom line improved a lot in the first half of this year,” Miao said, referring to its Chinese subsidiary TCC International Holdings Ltd (台泥國際集團), whose net profit rose almost 80 percent year-on-year in the first six months of this year.
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