Asia Cement Corp (亞洲水泥) shares rose 4.92 percent last week on the back of strong first-quarter earnings results, outperforming the main bourse, which fell 3.07 percent over the period.
Shares of the nation’s second-biggest cement producer have surged nearly 29 percent so far this year, compared with the main bourse’s 6.75 percent rise, as anticipated demand and stable prices in China this year have buoyed investor sentiment.
The company on Wednesday reported first-quarter net income of NT$2.93 billion (US$93.6 million), up 61 percent quarter-on-quarter and 54.4 percent annually.
Earnings per share (EPS) were NT$0.93, beating market expectations and reaching the highest first-quarter level since 2008.
Gross margin grew by 4.03 percentage points from a year earlier to 24.03 percent, while operating margin increased by 3.33 percentage points to 19.49 percent, the company’s financial statement showed.
Analysts said that the better-than-expected results were due mainly to strong cement business in China in terms of gross profit per tonne and non-operating income from its investments in other affiliates of its parent company, Far Eastern Group (遠東集團).
Asia Cement has invested in firms such as U-Ming Marine Transport Corp (裕民航運) and Far Eastern New Century Corp (遠東新世紀), a polyester and textile maker, as well as Shanshui Cement Group Ltd (山水水泥), which is the sixth-largest cement producer in China.
The company told an analysts’ meeting last week that it was still positive about the industry’s supply-demand dynamics and expected cement prices to rebound steadily, but did not provide numerical guidance for this quarter.
Asia Cement’s consolidated revenue in the first four months of this year rose 17.1 percent from the same period last year to NT$27.83 billion on the back of rising cement prices and increasing shipments.
“As the company’s first-quarter results beat market expectations, we expect continued growth momentum in the second quarter on the positive supply-demand trend in the Chinese cement business and Shanshui Cement’s equity income contribution,” President Capital Management Corp (統一投顧) said in a note on Thursday.
The investment consultancy expects Asia Cement’s gross profit per tonne to reach 156 yuan (US$22.55) in the second quarter, up from 149 yuan in the first quarter, raising its operating income by 69.4 percent to NT$6.39 billion.
President Capital has set a new 12-month target price of NT$50 for the company’s shares, up from the previous target of NT$45 and representing a 14.3 percent increase from their closing price of NT$43.75 on Friday.
Jih Sun Securities Investment Consulting Co (日盛投顧) also kept its “buy” recommendation for Asia Cement shares, and said it expects EPS to reach NT$4.34 this year, compared with NT$3.54 last year.
KGI Securities Investment Advisory Co (凱基投顧) retained its “buy” rating and raised its share price target to NT$51, forecasting EPS of NT$4.5.
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