The Siam Cement

The Siam Cement Plc (SCC)

Q3 2012 operating profit stands at B6.42bn, rising 50% QoQ

SCC’s 3Q12 earnings result comprises of net profit and operating profit at B6.42bn or 50% QoQ increase which is beyond our projection. The recovery of earnings result is due to petrochemical business that has generated profit once again. Although the spread of petrochemical products remains low, it is compensated by the sales volume that has increased to hit the record high
and the profit from inventory revaluation at B1bn. The business with highest profit in Q3 2012 goes to the cement business (35% of total profit), thanks to domestic growth of construction sector and revenue recognition from readymix concrete business in Indonesia. For the paper business, the profit has weakened slightly because of the fire accident in Phoenix Plus plant in July which has brought about loss of profit at B100m/month. In terms of other extraordinary items during the quarter, there are FX profit at B400m (recognized by offsetting with 3Q12 interest expense) and insurance claims for the flood damage at B300m. Overall, SCC’s operating profit in 9M12 stands at B16.7bn or 31% YoY decrease.

4Q12 profit improves constantly

4Q12 profit improves constantly due to cement construction material business and investment. In
4Q12, we believe that the profit from cement and construction material business would still be the major contribution for SCC while the petrochemical business would be likely to maintain the profit base close to

Fundamentals strengthen, growing continuously.
Reiterate “BUY”
SCC has got numerous stimuli due to the strategy of business expansion in ASEAN (in which the economic growth is high) and investment in other main business apart from petrochemical
business. Recently, the company has announced the investment project of cement and paper business with the total value of B23,200m. In 2013, SCC’s profit is projected to grow outstandingly once again as a result of continuous investment on expanding production capacity during the past years. The company’s profit is projected at B35.5bn or 43% YoY increase. 2013 fair value, using DCF, stands at B445 with 22% upside from the current share price. We reiterate our recommendation of “BUY”.
Key Data (Bm)
one in 3Q12. Despite the low season, BST’s return of operation since October has saved SCC from facing loss sharing from BST at B150m/quarter. In addition, the company has got better control of supply chain system in the petrochemical business. In 2Q12 and 4Q12, SCC would recognize dividend income from TOYOTA at around B1-1.5m/time. Accordingly, 4Q12 profit is
projected not to be lower than B7bn.