With Construction Investment on the Rise... Which Sectors Are Expected to Benefit? [Weekend Money]

"Cement Companies' Earnings Set to Jump Next Year With a Surge in Construction Starts"
"Stock Prices Expected to Rise Ahead on Anticipated Earnings Recovery"

There is an outlook that the stock prices of cement companies will rise in advance, reflecting expectations for improved performance in the sector next year.

A cement factory located on the outskirts of Seoul. Photo by Dongju Yoon doso7@

On August 22, Shinhan Investment Corp. forecasted that cement companies will continue to deliver stable earnings. In the second quarter of this year, the combined sales and operating profit of the five major cement companies reached 1.7 trillion won and 156.2 billion won, respectively. While sales and operating profit declined by 1% and 27% year-on-year, respectively, the performance is still regarded as solid, given the key cost pressures such as the prices of bituminous coal, freight costs, and exchange rates.

The ability to defend earnings, despite cost pressures, is mainly attributable to a 14% increase in construction starts in the first half of this year compared to the same period last year. Additional factors include improved results from consolidated subsidiaries and cost-saving efforts through the use of recycled resources and waste heat power generation facilities.

Stable results are expected to continue into the second half of this year, as the timing for cement input at housing and plant construction sites that broke ground in the first half is now approaching. The stabilization of oil prices and exchange rates compared to the second quarter will also help ease cost burdens, which is considered positive.

A full-fledged turnaround in earnings is expected to begin next year. Among the housing units in Seoul and Gyeonggi Province awaiting construction approval, 190,000 units are ready to break ground, while only 40,000 units started construction in the first half of this year. As a result, concentrated construction starts are likely to drive performance higher. Additionally, the fact that annual new housing supply is slated to reach 310,000 units this year is a positive factor.

Sunmi Kim, a researcher at Shinhan Investment Corp., stated, "As the market upturn becomes evident, we expect stock prices to be reflected in advance. Among the sector, Asia Cement Holdings is our top pick, as it holds a portfolio favorable for metropolitan construction starts and the launch of mega projects, making it highly likely to achieve a rapid recovery in earnings from next year onward."

This content was produced with the assistance of AI translation services.