RHB upgrades basic construction materials to 'overweight', Cahya Mata Sarawak the top pick

• The average selling price of aluminium is expected to be supported by slow Indonesian expansion, demand from electric vehicles and solar farms, and the increase in US tariffs on Chinese aluminium imports to 25%, from 7%, the house said.

KUALA LUMPUR (Sept 9): RHB Research has upgraded the basic construction materials sector to 'overweight' from 'neutral', amid a positive outlook on aluminium and cement companies under its coverage.

The average selling price of aluminium is expected to be supported by slow Indonesian expansion, demand from electric vehicles and solar farms, and the increase in US tariffs on Chinese aluminium imports to 25%, from 7%, the house said.

"However, while we expect growth in major drivers, such as for solar-capacity expansion to continue, the pace may moderate slightly in the second half of the year (2H2024) as compared to 1H2024," it said.

Prices could normalise from next year, with refinery expansion of one million tonnes each in Mempawah, Bintan and India scheduled from 4Q2024 to 2027, the house added.

For cement, the revival of construction projects is supporting demand. They include the Pan Borneo Highway, Sarawak-Sabah Link Road, Kuala Lumpur-Singapore High-Speed Rail, Johor-Singapore Rapid Transit System and Mass Rapid Transit 3, RHB Research added.

"Cahya Mata Sarawak Bhd (KL:CMS) is our sector top pick now, due to its direct exposure to the revival of construction activities in Sarawak, given its prominent role as the leading cement provider in the state," the house said.

RHB Research has 'buy' calls on CMS, with a target price (TP) of RM1.57, Malayan Cement Bhd (KL:MCEMENT), with a TP of RM7.18, and Press Metal Aluminium Holdings Bhd (KL:PMETAL), with a TP of RM6.53.

At the time of writing on Monday, CMS shares traded down four sen or 2.99% at RM1.30. MCement shares traded down 13 sen or 2.56% at RM4.95, while Press Metal shares traded one sen or 0.21% lower at RM4.79.

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