The Siam Cement

Blissful future ahead BUY

The Siam Cement Plc (SCC)

- 3Q14 net profit is B7,846m, dropping 20%yoy

3Q14 net profit was reported at B7,846m, dropping 20%yoy (but 9.4%

better than expected). Fx gain was booked at B680m. Profit from core

businesses was in line with projection. Profit from petrochemical business

was B4,188m, growing 10%yoy (the only business with qoq and yoy

growth); spreads of nearly every petrochemical products rose. Profit from

cement and construction material business dropped 43%yoy due to the

slowing economy and high profit base in 3Q13 (B1.7bn non-recurring profit

from investment revaluation was booked in 3Q13). Profit from paper

business fell by 10%yoy as a result of a maintenance shutdown that has

been postponed from 1H14 to 3Q14. Overall, 9M14 net profit was

B24,759m, decreasing 13%yoy.

- Prosperous profit projected in 4Q14 and 2015

4Q14 earnings are likely to prosper and make the year's peak.

Petrochemical business would receive a positive momentum from increasing

petrochemical spreads. HDPE-Naphtha spread is US$810/ton, and PPNaphtha

spread is US$849/ton. Sales are expected to be remarkably high

from shipment of some products that has been delayed from 3Q14. Cement

and construction material business already passed its bottom in 3Q14, likely

to rebound gradually from 4Q14 on. Paper business is projected generate

profit as usual. Moreover, SCC usually books B2bn dividend income from

investment business in this quarter. Overall, 4Q14 net profit is estimated at

least at B9bn.

- To grow from now on. BUY

SCC has attempted to promote growth by boosting its capacity and

expanding its market in ASEAN; its effort would pay off from 2015 on.

Petrochemical business would enter an uptrend, and cement and

construction material business would grow along with increasing

government and private government. FY2015 fair value (DCF) is B515,

implying 18.66% upside with 15.28x P/E ratio and 3.69% dividend yield.

We recommend BUY