Short-term risk weighing on slower sales
Near-term cement demand rebound may be disappointing clouding the longer term prospect. Our scenario analysis of cement demand suggests that infrastructure spending is unable to offset the shortfall from the property decline over the next two years, and is a negative for Conch, as a pure cement company.
A longer term prospect amid the green transition. Conch is able to deliver a superior GP compared to its major listed peers. Meanwhile, Conch’s capacity expansion will boost its self-supply of green energy and aggregate production during 2021-2023. This is expected to provide an additional driver to increase its cost efficiency, thereby enhancing its position as a cost leader.
And the room for market consolidation although less immediate share impact. Conch raised its stakes in four cement peers last year. Its strong balance sheet should enable it to raise its stake further or embark on market consolidation initiatives.