PETALING JAYA: Things are looking good for steel company Hiap Teck Venture Bhd (HTVB) as various factors are in play to boost its earnings ahead.
Hong Leong Investment Bank Research (HLIB Research), which is maintaining its “buy” call on HTVB with a higher target price of RM0.52, said the company’s brighter earnings prospects are supported by various factors.
They include the pending rollout of mega infrastructure projects and robust private sector job flows in Malaysia, rising capacity utilisation at its joint venture Eastern Steel Sdn Bhd’s (ESSB) new blast furnace, which will boost its contribution to HTVB’s bottom line, and the bottoming out of the weak demand sentiment for steel products in China.
“We believe the rollout of mega infrastructure projects and robust private sector job flows (from data centres, factories, warehouses and commercial and residential projects) in Malaysia will eventually lift domestic demand for steel products and thus, volumes at both HTVB’s trading and manufacturing segment.
“We understand that ESSB’s new blast furnace has achieved capacity utilisation of more than 95% (from around 80% in early April). The expanded capacity will boost ESSB’s contribution to HTVB.
“This will be underpinned by bottoming spread between prices of end products and inputs (in particular, iron ore and coking coal), better economies of scale (which would result in lower unit fixed costs) and transportation cost savings from the completion of a conveyor belt, which started operating in January, that is used used to transport raw materials from a jetty to its plant,” the research house added.
HLIB Research said it also understands that the construction of its hot rolled coil plant is underway and on track for completion by September this year.
While trimming its financial year 2024 (FY24) core net profit forecast by 9.1%, to account for lower downstream margins and higher finance-cost assumptions, the research house is raising its FY25 core net profit forecast by 28.7%, mainly to reflect contribution from ESSB’s expanded capacity.
Through its subsidiaries, HTVB imports, exports and deals in steel products, metal hardware and building materials. It also invests ln and rents property.